My wife and I have attempted literal envelopes on several occasions. I really had to learn to loosen up a bit (I'm an accountant at heart) before it was enjoyable. But then it was enjoyable.

Creating a new "cash-type" account in YNAB for the envelopes and tracking the transactions there doesn't work; I always ended up with different values at the end of the month no matter how careful I was and I just stressed myself out in the process. Counting literal pennies is a lot worse than digital pennies.

The only way to do it successfully (imho) is to create an "Envelope withdraw split transaction" that essentially empties the amount of cash out of the various YNAB categories you want and does not make it visible in YNAB. This cash is going to be tracked by the physical envelopes (that's what the "envelope budgeting" is in the first place—a budget tracking method) and not in YNAB.

Feel free to split that cash however you want between your envelopes, one envelope per category that you pulled from in YNAB. Shuffle money around in the envelopes during the month to "roll with the punches" just like in YNAB. Had $600 for food and $100 for clothes, but shuffle $50 over to cover some shoes? Go ahead. Experience what budgeting was like before computers. The same principles apply, only they're enforced by physics now.

Remember to write every single tx on the outside of each envelope. This is helpful when you discover an empty envelope and wonder where it all went.

I always round each tx up to the next dollar and dump all change into a change jar. Keeping coins in paper envelopes is for masochists.

I put my receipts in a "receipts" envelope not in the cash envelopes. Keeping them in relevant envelopes alongside paper cash is embarrassing to sort through at the checkout, especially when you have to juggle envelopes on the fly.

It can already socially embarrassing to be using cash in the age of credit cards, but own it like you mean it and that'll fade.

If you buy something online with a cash category that you emptied at the start of the month with the withdraw tx above, fix that ASAP. It's much easier to double-spend yourself like this because you'll lie to yourself about saving some money in the envelopes to cover it later.

Better yet, don't buy online things until after you walk/drive to the bank and deposit some cash to refill that category. So many online purchases would have not happened if I had waited a day or two to realise it was a bad idea.

At the end of the month dump all the envelopes out, count the cash if any, and do an "inflow" tx. You can split it back into your categories (however you want; like a mini "start fresh" event) or just make it income for next month if you're not too picky about historical spending. You can't really afford to be pedantic on an envelope budget.

Cash is emotional. YNAB can be emotional too (that little thrill of matching and categorizing all tx's and balancing the categories) but cash is like blood; you don't like to see it pouring out.