An Intro to the Envelope Budget System


Bronze Wordsmith
May 17, 2018
What’s up, everyone? Through this forum, I’ve been sharing a bunch of awesome earning methods. It’s great to get feedback from people who have made good use of my earning advice. But now that you’ve been earning, we need to talk about how to save your money! Saving a good chunk of your income is one of the key methods to becoming financially secure.

In this post, I’ll be talking about one of my favorite budgeting methods: the envelope budget system. It’s a simple, even old school, method of saving money, but hey, if it works, it works, right?

The world has gone digital, and that includes the budgeting process. There’s no shortage of awesome apps that help you keep track of your finances. Even I use a bunch of them. If you’re interested in budgeting apps, this article on Investopedia has some good suggestions. But even if you use a budgeting app, don’t neglect simple budgeting systems!

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What is the Envelope Budget System?

Okay, I might have gotten ahead of myself. If you’ve been scratching your head over what I’ve been writing about, here’s an intro to the envelope budget system. Simply put, this is one of the best ways to save money. The envelope budgeting system involves just that – a plain envelope. Or envelopes, to be more accurate. Basically, this involves putting money that is meant for a particular expense in its corresponding envelope.

For example, money meant for groceries goes into the grocery envelope. Money meant for your monthly electric bills goes to the electricity envelope, and so on.

If you’ve been looking for info on how to budget and save money, you should definitely consider the envelope budget system. The envelope budget system is easy to implement, and most importantly, it’s easy to stick with. Let’s check out the benefits of this saving method in greater detail.

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The Benefits of the Envelope Budget System

As mentioned above, the envelope budget system has lots of benefits. In addition to being easy to do and stick with, here are a few more benefits to this system. I will also be giving a few random tips for saving throughout this section.

It’s Easier to Keep Track of Your Money

When you do the envelope budget system, you’re literally splitting up your money into their corresponding sections. That makes it easier to track how much money you’ve got allocated for certain payables.

And if the cost of certain payable changes, it’s easy to move money from one envelope to the other. For example, if my electricity bill turns out to be cheaper this month, I can move the extra money to my savings envelope.

Budgeting with physical money also gives you a better idea of what you’re spending your money on. With a mobile app, budgeting money feels more abstract. You’re basically just moving a bunch of 1’s and 0’s on your screen. But with the envelope method, I have a better idea of how much money I’m budgeting. If I set too much money aside for groceries, I can literally see that grocery envelope has more cash than needed. And that makes it easier to adjust.

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It’s a “Sustainable” Way of Budgeting

When you save and budget via the envelope method, you can see how much money you’re allocating for each payable. This makes it easier to stick to your program since you become more aware of the money you’re handling.

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It’s a Great Budgeting Method for Multiple Income Households

If you and your spouse pool your income together, this is a great way to keep track of your money. For example, my wife and I each allocate a certain amount for groceries each month. Instead of scratching our heads while trying to split the grocery bill at the checkout, we put that amount into an envelope. We then take that envelope to the grocery and use it as our “wallet.”

This applies to our other payable. We simply put our share of the budget into the envelope. It’s become an automatic process, and once the money is in the envelope, no further tracking is needed.

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Tips to Saving with the Envelope Budget System

Hopefully, I’ve convinced you that the envelope method is an awesome way to budget your money. In this section, I’ll be sharing a bunch of savings tips for this method.

Use Colored Envelopes

Labeling your envelopes is a must. But I also suggest using various colors for your payables. This isn’t just to be cute; when your envelopes have different colors, it becomes easier to know at a glance what that envelope is for. For example, we use a green envelope for our groceries and a red envelope for our electricity bill. When I open my drawer, I can spot immediately which one is which.

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Set Aside Your Money ASAP

Since you’re moving physical cash around, it can also be easier to spend that money. And that’s both a good and bad thing. Good because it’s easier to spend cash you already have on-hand. Bad because, well, it’s also easier to make impulse purchases.

To avoid that, I immediately put my money in their respective envelopes. Putting money in an envelope “formalizes” and makes the money slightly harder to spend on things it wasn’t meant for.

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Keep Your Money Safe and Secure

Since you’re handling real money, you have to keep all that cash safe. I like to keep my envelopes in a drawer under lock and key. This gives me some extra peace of mind when I’m out and about running errands. And, let’s be honest, it also protects my money from me! Since the money is hidden away, it’s a little harder for me to casually dip into my money for unplanned purchases.

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Save Any Extra Money

At the end of each money, you might discover that you have some extra money in your envelopes. This is awesome, but you should save the money you have left over instead of spending it!

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