Envelope budgeting, done digitally.
The old method without the paper.

How the envelope method works

The classic version is physical. On payday you withdraw cash and divide it into paper envelopes labelled Groceries, Eating out, Transport, Fun. Each purchase is paid from its envelope. When Eating out is empty on the 20th, there are no more restaurants until next payday — or you take money from another envelope and feel exactly what that costs.

It works because the limit is visible at the moment you spend. You don’t discover at the end of the month that you overspent; you see the envelope getting thin while there is still time to change course.

Why go digital — and what changes

Most spending today is by card, phone and online, so stuffing cash into envelopes is awkward and carrying it all around is not very safe. The digital version keeps the idea and drops the paper: every category gets a monthly limit, every expense is logged in its category, and the remaining amount is always one glance away.

To be honest about it: in a tracker no money moves. Your salary stays in your bank account; the envelopes are numbers that describe how you plan to spend it. The discipline comes from logging each purchase and looking at what is left — not from a bank sealing anything.

Setting up your envelopes in five steps

1. Take fixed bills out first. Rent, utilities, phone and insurance don’t need envelopes — they are the same every month. Set them up as recurring entries and subtract them from income.
2. Choose five to eight envelopes. The categories where your choices matter: groceries, eating out, transport, shopping, entertainment, gifts. Not sure which? See how to categorise expenses.
3. Fill them from real numbers. Use last month’s spending per category, then trim a little where you want to change something.
4. Make the total fit. Bills plus envelopes plus savings must not exceed your take-home pay. If they do, an envelope gets smaller.
5. Log every expense in its envelope. Cash included — that is where envelopes leak.

An example month on 2,100 €

Take-home pay: 2,100 €. Fixed bills: 1,050 € (rent, utilities, phone, insurance, public transport pass). Savings first: 300 € to a savings account. That leaves 750 € for six envelopes:

• Groceries — 300 €
• Eating out — 120 €
• Transport extras (taxi, fuel) — 80 €
• Shopping — 100 €
• Entertainment — 100 €
• Gifts — 50 €

Every euro has a job: 1,050 + 300 + 750 = 2,100 €. In week two you see that Eating out has 30 € left with sixteen days to go. That is the moment the method is built for — you still have a choice.

What to do when an envelope is empty

• Stop, if you can. The simplest rule: an empty envelope means no more spending in that category this month.
• Move money on purpose. Take 40 € from Shopping and add it to Groceries — lower one limit, raise the other. The total stays the same; you have decided where the cut falls.
• Don’t raid savings. Savings are not an envelope. Taking from them every month means the plan is wrong, not that you need more willpower.
• Learn from it. If the same envelope runs dry three months in a row, the amount was unrealistic. Raise it and find the money in another one.
• Leftovers at month end can go to a savings goal as a transfer, so they are not quietly spent next month.

Envelopes in HonestExpenses

HonestExpenses has no special “envelope” mode, because category budgets already are envelopes:

• A monthly budget per category — or one for all spending. A parent category’s budget includes its subcategories, so a Food envelope covers groceries, restaurants and coffee together.
• What’s left, per day. Each budget shows the remaining amount, roughly how much that is per day, and where the month is heading at the current pace.
• Alerts at 80 % and 100 % in the app, and in Telegram if you use the bot — see the Telegram bot.
• New limits apply from the current month, and earlier months keep theirs, so history stays honest.
• Recurring operations for the fixed bills, and goals for the savings you put aside first.

Budgets reset every month; unspent amounts don’t roll over automatically. If you want leftovers to count, move them to a goal. More on limits in the monthly budget planner. Coming from an envelope-style app? Read switching from YNAB.

Questions

Read next

• Log expenses by voice. One sentence, several transactions.
• Track Apple Pay purchases automatically. Pay in a shop — the expense records itself.
• Automatic expense tracking on Android. Pay with any card — the expense records itself.
• An expense tracker in Telegram. With a full app behind it.
• An expense tracker without a bank link. You log it — in seconds.
• How to track your expenses. And still be doing it in three months.