Envelope System Guide

I have tried time and time again to live by the envelope system, and failed.  For a refresher on what the envelope system is, read this post.  The gist of it is: you set cash aside for the month for different areas of your budget and once that cash is completely spent, you’re done for the month.  It’s a very good way to discipline yourself when trying to take control of your spending.  Below are some of tips on what an envelope system may look like.

Some examples of envelopes with a set amount of cash at the beginning of the month:

  • Gas
  • Groceries
  • Restaurant/Bars
  • Clothes
  • Fun/Entertainment

Things that wouldn’t have a cash envelope because they are direct deposited:

  • Phone bill
  • Car/renters insurance
  • student loan payments
  • Rent
  • Utilities

Key things to remember when doing the envelope system:

  • Don’t borrow from one envelope to add to the other; the envelope system should reflect your written budget.  If you have to borrow money, you probably need to update your budget!
  • If you have $200 in the grocery envelope and spend $150 of it, the left over $50 should go BACK IN the grocery envelope!  It can be used for the next trip; it should not be used for clothes/fun.
  • Use your bank/credit union’s ATM so you won’t be charged a fee to take out money every month

I think, for my personal envelope system, I won’t use all of these envelopes because I don’t budget for fun/entertainment or clothes.  (I find free entertainment and wear the clothes I own for now.) Other than that I’m going to do my best to stick with the envelope this time around!  I’m also going to be recorded updates on my goal progress, but would be great of some of you try it/have tried it can comment below and let me know your experience with it!

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