What is the envelope budgeting system and does it work?

What is the envelope budgeting system?

What is the envelope budgeting system and does it work?

Disclosure: This post contains affiliate links, which means I earn a commission at no expense to you. Affiliate links are marked with the asterisks (*)

There are different types of budgeting systems available. The envelope budgeting system is one of the oldest and still most popular.

When you look around at all the budgeting systems available, you may find yourself a little overwhelmed. There are some systems that have been around for decades, and one of those is the envelope budgeting system.

If you’re struggling with budgeting, this could be the way to manage it. However, you’ll want to know what this system is, how it works, and whether it’s any good for you. Just a note, I don’t use this system. At least, not in its entirety, but I do vouch for it working for many people.

What is the envelope budgeting system?

This system is just what it sounds like. You put money into specific envelopes for various needs. This will be your groceries, dining out, gas, clothing, and more. Every single envelope has only one purpose. Once the money is spent, that’s it for the rest of the month.

You will need to set up a budget first. It’s important to know how much you get paid each month and how much you need for certain aspects of your life. Take out anything for rent, utilities, and other payments you make online or via a card because of their systems in place. After that, you can take out the rest of the money in cash and put it all in envelopes.

If you don’t use all the money in the envelopes, you have a couple of options. You could put all that money into a savings account. This is a great way to show that you can save and you don’t need to spend. Alternatively, you can roll it into the next month. I wouldn’t recommend setting a higher allowance each month, though. Why not save the money you didn’t spend?

What if you don’t like paying for things in cash?

Don’t like paying for things in cash? I get that. I prefer card payments. However, I put everything on a credit card and clear it every single month once the paycheck comes in. As I’m self-employed with clients paying at different times of the month, I need to be able to manage my cash flow.

You can do the envelope budgeting system without the physical envelopes, but it will take more diligence on your part. You’ll need to keep track of things on a spreadsheet to make sure you only spend the allowance you give for each individual area of spending.

Can you get rid of your budgeting spreadsheet?

You’re still going to need your budgeting spreadsheet as you run with the envelope budgeting system. This is going to help you keep track of everything each month.

One option would be to write on the wrong of the envelopes when you spend money. You can write the total you start with and deduct. You’ll need new envelopes eventually, though, possibly every month. With the spreadsheet on your computer, you can update it as you go. This way, you keep it all accessible wherever you are and don’t have to worry about people seeing you deducting money on your envelopes.

If you need to do things by hand, get a budget planner. Clever Fox* has some great options when it comes to the envelope budgeting system.

This is one of the oldest methods of budgeting, and it works for so many. Even if you only do it for a few months, you could really see the difference and finally get some budgeting under your belt.

MORE: 5 tips for saving for a big move

Which budgeting method are you trying? Are you testing out the envelope system? Share your thoughts in the comments below.

Alexandria Ingham is a professional writer. She predominately ghost-writes in various niches, including fitness, finance and technology Everything is fully researched and well-written. Under her own name, she writes in the technology, business, history and weight loss niches

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top