What categories should cash envelopes be?
Use envelopes only for the categories where you actually overspend, and pay everything predictable from the bank. For most people that's groceries, eating out, and fun — variable, tempting, and easy to lose track of. Rent and insurance don't need envelopes; they never surprise you.
Fewer envelopes, not more
The instinct is to make an envelope for everything. It fails within a month, because twelve envelopes means twelve decisions every time you buy something, and any category small enough to run out weekly just gets topped up from another one.
Three to five is where most people land. An envelope should represent a decision you actually make.
What doesn't need an envelope
Anything with a fixed amount and a fixed date. Rent, insurance, subscriptions, loan payments. These don't need a spending limit because you aren't deciding anything — you just need the money there on the day.
Cash envelopes are for the spending where the limit changes your behavior.
A starting split
Groceries 40%, gas 20%, eating out 15%, fun 15%, misc 10% of whatever cash you're splitting. This is a starting point, not a rule — the correct split is the one that matches what you actually spend, which you'll know after one cycle.
Adjust after the first period rather than guessing harder before it.
Written by Larder, makers of an envelope budgeting app for iPhone. Last reviewed .