Saving money can sometimes be a difficult task to do. Although this can be even harder for those who earn a low income, or have to pay down their debt. So, that’s why using something like the envelope method is a great option!
So, keep on reading to see how this budgeting method can help you to keep your money where it belongs.
What Is The Envelope Method?
The envelope method (also known as the cash envelope method or envelope system) is a supplementary system that allows you to budget your money and physically separate it into categories.
For instance, let’s say that you had the budget categories of groceries, gas, and your phone service.
To create your budget system, you would take three envelopes and label each one with one of the categories from above. Then, you would put the budgeted amount of cash, into each one. After that, you can only spend the amount of money in the envelope on the expense that it’s assigned (However, there’s a big debate of whether you can “borrow” from other envelopes or not. So, I’ll leave that up to you).
Once, you’ve finished meeting your monthly budgeting goals, you can refill the envelopes with their next allotment of cash.
Benefits of the Envelope Budgeting Method
This budget system is great to use because it helps you to track your expenses and serve as a visual representation of what you can and can not spend. So, it’s great for those who might not know how to make a budget or budgeting beginners. It can also be helpful for those who might lack discipline with their personal finances.
Another benefit of the envelope method is that it can help you budget for things that are not necessarily a monthly living expense (like a future expense that you are saving up for).
On the other hand, there are also some cons to using the system. For instance, if you pay for most of your purchases with cards or online payment services, you might have a harder time using this method.
Also, since you have to carry around your money with you, you will have to know which envelopes you’ll need to bring with you before you start spending. Otherwise, you’ll be short in one cash envelope, or you might borrow too much from the other categories.
However, a bonus of using the envelope method is that you’re less likely to overspend, so you won’t have to worry about overdraft fees. So, it’s safe to say that using the envelope method can help you to save money.
Hopefully, you enjoyed learning about this budgeting method. If you want to read something similar to this, click here.
Hannah Roberts is the creator of Do. Live. Study. She loves to learn new things and hopes to help others as they go throughout their journey as an adult. You can connect with her below.