How to Use the Envelope System When You Earn Less
6/26/2025
How to Use the Envelope System When You Earn Less
When you're living on a tight income, budgeting isn't just helpful—it’s essential. But traditional budgeting apps or spreadsheets can feel overwhelming, especially if you’re juggling unpredictable expenses or don’t have a financial cushion.
That’s where the envelope system comes in. This old-school, cash-based budgeting method gives you full control over your money, even when you earn less. It’s simple, tangible, and effective.
What Is the Envelope System?
The envelope system is a method where you divide your cash into separate envelopes, each labeled for a specific expense category. You spend only from that envelope and stop when it's empty.
It creates a visual, physical limit for your spending. Once the envelope is out of money, you're done spending in that category—no borrowing from another.
This system works especially well if:
- You have a variable or low income
- You’ve struggled with overspending
- You want to feel more connected to your money
Step-by-Step: Using the Envelope System on a Low Income
1. Know Your Monthly Income
If your income is irregular, calculate your average monthly earnings from the last 3–6 months. Use the lowest estimate to stay conservative.
Example:
- Total from last 3 months: ₹60,000 + ₹45,000 + ₹50,000 = ₹155,000
- Average: ₹51,600
- Use ₹45,000 as your planning base
2. List Your Expense Categories
Write down all your monthly spending categories. Prioritize essentials first:
- Rent
- Groceries
- Utilities
- Transport
- Health
- School fees (if applicable)
- Personal expenses
- Emergency or savings (even if small)
3. Allocate Cash to Envelopes
Based on your income, assign a cash amount to each category.
Example for a ₹45,000 budget:
| Category | Envelope Amount |
|---|---|
| Rent | ₹10,000 |
| Groceries | ₹6,000 |
| Transport | ₹2,000 |
| Utilities | ₹3,000 |
| Health | ₹1,000 |
| Personal | ₹2,500 |
| Savings | ₹500 |
| Emergency | ₹1,000 |
| Total | ₹26,000 (Cash-managed categories) |
Some fixed payments like rent can still be made online, but you can track them on paper or in a digital “envelope.”
4. Withdraw and Fill the Envelopes
Once you’re paid, withdraw the cash and place it into labeled envelopes.
You can use:
- Physical envelopes
- Reusable zipper pouches
- Paper clips with category tags
If using digital wallets, you can create virtual envelopes by using:
- Prepaid cards
- Multiple bank accounts
- Budgeting apps with envelope features
5. Spend Only From the Envelope
This is where the magic happens.
If your “Groceries” envelope has ₹6,000, that’s your limit for the month. If it runs out on day 20, you either:
- Make do with what’s in your kitchen
- Move funds intentionally from another envelope (like “Dining Out”)
No more swiping cards mindlessly or overspending.
Why the Envelope System Works (Especially When You Earn Less)
- It enforces discipline without technology
- It makes overspending physically harder
- It increases awareness of needs vs. wants
- It removes the illusion of endless credit or UPI access
Low income makes every rupee count. The envelope system helps you feel in control rather than anxious or reactive.
Tips to Succeed with the Envelope System
- Start with just 3–4 envelopes to keep it simple
- Track your spending weekly
- Don’t give up if you overspend once—adjust and try again next month
- Add an “unexpected” envelope to absorb surprise expenses
Combine It With Kakeibo for Even Deeper Awareness
If you’re looking to pair the envelope system with a more mindful approach, try combining it with the Kakeibo method.
While envelopes help you control spending, Kakeibo helps you reflect on why and how you spend.
Learn more here: Kakeibo vs 50/30/20 Rule — Which One Works Better?
Final Thoughts
Budgeting on a low income isn’t about being perfect — it’s about being present and intentional with your money.
The envelope system keeps things simple and real. It turns budgeting from a vague goal into a daily practice you can feel and trust.
Start with just a few envelopes this month. Feel the control return to your hands, one rupee at a time.
Need help getting started?
Download our free printable envelope labels and budgeting worksheet at kakeibo-templates.com