Budgeting Basics | When Cash Envelopes Don’t Work ~ Open a Checking Account (& Get $25 Bonus)

This post contains referral links, which help to support Kosher on a Budget. For more information, see my disclosure policy.

When my husband and I got serious about saving money, one of the most important things we had to do was figure out how exactly much money we were spending in the first place.

You can’t spend less, unless you know how much you’re spending.

Sounds obvious, right?

But, I think most of us aren’t as mindful as we should be when we’re standing in line at the store. How often do we swipe our credit cards and sign that little pad without really paying attention?

Just the other day, I found this happening to me again. My phone rang as I was checking out, and by the time I got off the phone, I was half-way home – with no idea how much money I’d just spent. Fortunately I found the receipt when I got home and it was only $19, but enough mindless trips like that and your budget is going to be seriously out of whack.

One of the oldest methods for combating this credit card “cluelessness” is to use a cash envelope. Actually, this method predates credit cards entirely!

Cash envelopes are super simple: You determine your grocery budget, take out that amount in cash from the bank, put the cash in an envelope, and only use that cash to buy your groceries.

When the money is gone, it’s gone. No tracking expenses required – you just stop spending.

Even though I just said “It’s super simple“, my husband and I actually found that we could not make these envelopes work for us. Our two biggest hang-ups were:

1. Frankie doesn’t like to carry a lot of cash on him – and since our grocery budget is $500, that’s a fairly sizable amount of cash at the beginning of the month. This was probably the smallest of our obstacles, but it was an impediment to us adopting the cash envelope system nonetheless.

2. The bigger problem is that both Frankie & I do the grocery shopping on any given week.  And I was never sure how much to give him for his envelope vs. how much to keep for my own envelope. Inevitably, I’d get it wrong, and one of us would be at the grocery store without enough money to cover the bill – even though the other person still had plenty left in their envelope. We’d end up putting the groceries on a credit card or borrowing from a different envelope (such as clothing, blow money, etc.) – which was creating an accounting nightmare.

So, I did the next best thing. I created a VIRTUAL cash envelope.

Capital One Logo

I achieved this by opening an online checking account with Capital One 360. I use it exclusively for our grocery budget. We got two debit cards with the account – one for me and one for Frankie.

Every month, I move $500 into this checking account. I intentionally choose not to have overdraft protection, since Capital One 360 doesn’t let you spend a penny beyond your limit. If you only have $50.26 left in the account, and you’re trying to buy $50.29 worth of groceries – it will approve the first $50.26 – and reject the last $.03.

Our $0 balance Capital One 360 Checking is just like an empty cash envelope. When it’s gone, it’s gone.

It’s totally free to have a Capital One 360 account and you don’t need to maintain a minimum balance. I have our Capital One 360 Checking linked to our primary checking – since that’s where I transfer the $500 from every month. But if you want Capital One 360 to be your primary account, you can do that, too.

Oh, and they have recently started offering free checkbooks – so if you absolutely must write a paper check, you’re good.

The best news is that right now, Capital One 360 is offering a $25 cashback bonus when you sign up for a Capital One 360 account. Yes, $50 of FREE MONEY for groceries (or whatever else you want to buy.)

Virtual  cash envelopes – with an extra $25 in them!

Go here to Open a Capital One 360 Checking account.


  1. Mara:
    I have a question about the envelope system. What do you do if you have money leftover in your envelope? Do you keep it in case you need more the next month, spend it in a different catagory, or just take out less from your account the next month? Or maybe something else all together?

    • Ellen – I don’t think there’s a real right or wrong answer, but here’s what I suggest: If you have money left over, roll it over into the same category for the next month.

      We do that with our ‘virtual’ clothing budget. Some months we spend nothing, others we spend $100, but that balances out to our $50/month.

      If you consistently find that you are over-budgeted, I would go ahead and change the amount that you are budgeting. If every month, you have at least $50 left in your food envelope, then cut your budget by $50 and reallocate that money to another category (debt repayment, short- or long-term savings goals, etc.)


  2. ING is offering $75 bonus on new IRAs.

  3. Thanks. I will try that and see how it works.

  4. What a wonderful idea!

  5. A virtual envelope. I love it!

  6. I have been wanting to do the Envelope System with my husband for years, but have always shyed away for the exact reasons you listed above. This is such a great concept! Following your links now.

  7. GREAT post! Love ING, especially since I am a DE native : )

    How do you handle other envelopes, like gas money, clothing, doctor visits, presents for others, etc.? Do you have multiple, separate ING electric accounts for those too?

    My hubbie and I used to have the same problems with the cash based envelopes as you cited; happy to see that you have devised a solution!

    • I only have one checking account for the food. For the other things you mentioned, let’s see:

      Gas money – that goes exclusively on our AmEx, and we track it with Mint.com.

      Clothing – again, charged, tracked with Mint.com, but with the carry-over feature, so it reflects our total for the year. Since our budget for clothing is so much smaller than our budget for food, it doesn’t have as much impact on our total budget, and I don’t mind keep it ‘co-mingled’.

      Doctor Visits – I have an HSA, so all medial related ‘stuff’ is run out of this account

      Presents for Others – It depends on what it is, but this is usually absorbed in our groceries and household expenses budget, believe it or not.


  8. Do you also use the debit card when you need to just pick up one thing from the grocery…?

    • I do! Doing this consistently, across the board, is the best way for me to ensure that I stay within my budget.

Leave a Comment