How To Budget With the Envelope System

How To Budget With the Envelope System

( – Inflation is on everyone’s mind right now. With the cost of basic commodities skyrocketing, many of us are thinking about how we can tighten our belts until we return to calmer economic waters. One method some people have started using is the envelope system.

This savings framework requires you to categorize all your expenditures, set aside a portion of your monthly income to cover each category, and place that amount of money in an envelope (or a modern digital equivalent) assigned to each part of your outflow.

The idea of this system is to discourage aimless spending by reducing uncertainty around how much money you have available for different purchases. For example, when you realize you only have $50 left to spend in bars and restaurants for the rest of the month, you may be inspired to spend more carefully in those settings. The system also highlights areas where your spending may be problematic.

Envelope budgeting isn’t all about harsh realizations and tough financial love. The method is great for avoiding credit card debt, since users are always using cash instead of plastic. This type of budgeter avoids overdraft fees, learns more thoughtful (and less wasteful) spending habits, and develops a new sense of discipline when it comes to how to handle cash.

This budgeting method offers a systematic yet adaptable approach to money management. One of the best things about it is flexibility. Have an envelope for an item that was never needed or that no longer serves a purpose? Get rid of that envelope and reallocate the money elsewhere. Have a special event coming up? Add an extra envelope and start saving.

Envelope budgeting may mean developing some new habits (like remembering to get cash from the ATM), but it can be incredibly rewarding. Give it a bit of time and you may just be surprised!

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