Good Old Fashion Envelope System

Have you ever heard of the envelope system? Well, I have been using this for several years now and I have to say I really like it. The envelope system is an easy way to maintain your budget. The key idea is to store your cash in separate categories of household expenses using envelopes. For example, a person might write on the front of the envelope “Utility Bills” or “Groceries” and write the amount allocated for those expenses.  A person can really use the envelope system for any expense, including a vacation fund.

Envelope System

So, why does this help? Typically, this method will help prevent a person from spending the money out of their pocket or bank account. It is far too easy to swipe a credit card or debit card, which does not hold you accountable like cash does. For example, if you allocate $300 per month for groceries and you use all of the cash from the envelope you will not have any more money to spend in that area. In some ways, this system is protecting you from yourself. For me, it helps me strengthen my financial discipline.

The envelope system does have some disadvantages, however.  First of all, you have to withdraw money from the bank or ATM. How many us really enjoy doing that task. Also, it is difficult to get everyone on board in the family. Some members of the family are adamantly against using cash. Having everyone participate is absolutely crucial.

In the end, I would suggest trying the envelope system on a few bills to just see if you feel comfortable with it. Try choosing categories that you struggle with first. My area has always been entertainment.

If you think that this method of budgeting  might be for you, I would visit GoodBudget to  learn more about how you can utilize this system.  I have not personally purchased anything from that site, but I do believe the website thoroughly explains how the envelope system works. I hope this article has been helpful.


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