The Envelope System for Personal Budgeting

The envelope system is a personal budgeting technique that has been used successfully for many years. Here are the basics of the envelope budgeting system and how it works.

Categories

In order to successfully implement the envelope budgeting system, you will need to divide your monthly spending into several different categories. Try to look at your expenses and divide them into definable groups. You are then going to write the name of each category on the front of a blank envelope. You will then need to determine how much money you want to devote from your paycheck into each spending category.

Using Cash

Once you get paid, you are going to cash your paycheck and put a certain amount of money in each envelope. Whenever an expense comes up, you are going to take out the appropriate amount of money from one of the envelopes. You will use the money for the expense.

Replenishing

As you use your money from each category, the amount in each envelope is going to be depleted. Whenever you get to the end of the money in your envelope, you will not be able to make any more purchases from that category. The envelope will then be replenished whenever you get paid again.

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