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Budgeting Tips Envelope Budgeting

Updated on June 16, 2011

Envelope budgeting is the simplest of all the budgeting tips and using it will enable you to keep track of your personal finances and potentially save money.

Even though envelope budgeting is a simple way to budget your personal finances it is still incredibly effective.

Further, envelope budgeting has been used successfully for generations so its proven its worth.

We stopped using these simple family budgeting methods when we were able to have out money paid directly into our bank accounts and more latterly, withdraw money using ATM machines, and other electronic methods of accessing out money. The incredibly easy access coupled with easy credit such as credit card accounts has meant that its been very easy to lose touch with the reality of money. Its complicated our personal finance arrangements and helped those who aren't so disciplined get into serious debt problems.

However, here is an easy peasy solution to money handling and that's envelope budgeting.

Use One Envelope for Each Spending Category

An Envelope for Every Category

Envelope budgeting will get you back in touch with the reality of money because you will handle cash. There are just five easy steps to implement this method of budgeting your money.

You need to make one category for each major area of spending like rent or mortgage payments, utilities, insurance, supermarket spending, school uniforms, dining out etc. Depending upon how often you get paid or how often the bill has to be paid will determine how you allocate these categories.

For example, if you get paid weekly but your utility bill is paid monthly, allocate a quarter of the monthly power bill to each week.

Ensure you allow some for saving money which you'll want to leave in the bank so it earns you interest.

Shop from the Appropriate Envelope

When you go shopping, you spend from that envelope. If you are going to the supermarket and you have $150 in your envelope then that’s the maximum you can spend on groceries for that particular time period.

Choices when there’s insufficient money

What if you want to buy something and you look into your envelope, but there isn't enough money to complete the purchase? Or, what happens when you have an unexpected bill? In these instances you have three choices:

  1. You choose not to make the purchase
  2. You wait until you have managed to accumulate sufficient money
  3. You take the money from another envelope to made the purchase

Try it. You will be surprised just how easy it is to implement and use the envelope form of budgeting your personal finances.

And finally.......

This article is copyright Travelespresso. Do not copy.

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    • travelespresso profile image

      travelespresso 3 years ago from Somewhere in this exciting world.

      I'm so glad you found it useful. Thanks for commenting!

    • liesl5858 profile image

      Linda Bryen 3 years ago from United Kingdom

      Thank you for this Hub travelespresso, It is so useful and easy to manage money without having to go overdrawn or go over limit on it because you know exactly how much you got in each envelope. I think it helps not to overspend when you got this kind of budgeting.

    • travelespresso profile image

      travelespresso 6 years ago from Somewhere in this exciting world.

      Thanks for commenting on Envelope Budgeting - indeed it is tried and true. Thanks for stopping by RTalloni.

    • RTalloni profile image

      RTalloni 6 years ago from the short journey

      This is a tried and true method for getting a grip on one's finances. Good to see it posted.

    • Megan Coxe profile image

      Megan Coxe 6 years ago from somewhere between here and there

      Very nice hub, and very useful for me, since I´ve been trying to figure out the best ways to budget as I begin grad school!

    • travelespresso profile image

      travelespresso 6 years ago from Somewhere in this exciting world.

      Being able to easily measure your progress is indeed a bonus. Thanks for making such a good point.

      Thanks for stopping by and leaving a comment.

    • Taleb80 profile image

      Taleb AlDris 6 years ago


      I agree with you, it is simple & effective as you can measure your sucess continuously.

      And the best when you find that, you start to save from some envelopes.

      Thank you for sharing.

      I voted "Useful"


    • travelespresso profile image

      travelespresso 6 years ago from Somewhere in this exciting world.

      If you want to use the envelope system of budgeting then you could withdraw the cash required for the week or month, put it into the envelopes and follow the system outlined above.

      I think that what's making it harder to manage these days is easy access to money. Credit cards tend to give us the illusion that money is readily available and so we spend, spend, spend. Nowadays, I believe, we have to exercise MUCH greater control to avoid the consumer traps.

      Thanks for stopping by and leaving a thought provoking comment.

    • N.E. Wright profile image

      N.E. Wright 6 years ago from Bronx, NY

      Hello Travelespresso,

      This article is very informative. I found these tips very helpful, and plan to use them.

      Thank you so much for sharing this Hub.

      Take Care,


    • Peter Owen profile image

      Peter Owen 6 years ago from West Hempstead, NY

      Would like to hear how you do address the technologial problems these days with ATM cards, credit cards, direct deposit all working against the old envelop system. I also used this system, but technology just made it too hard to manage.

    • travelespresso profile image

      travelespresso 6 years ago from Somewhere in this exciting world.

      When you can SEE the money its much easier to identify where it goes. Point of sale transactions can be dangerous as this step is no longer so easy to see.

      Thank you for stopping by and sharing your experience of envelope budgeting esatchel.

    • esatchel profile image

      PDGreenwell 6 years ago from Kentucky

      We used this method as well, when we first got married. I still love it although I prefer to avoid lots of loose cash anymore. If we get out of hand with grocery or other shopping spending, we do go back to envelopes in those areas until we are back in control. It is so easy to SEE the money being frittered away on unnecessary expenditures with the envelope system.

    • travelespresso profile image

      travelespresso 6 years ago from Somewhere in this exciting world.

      Envelope budgeting sure is a really simple budgeting tip and I'm so glad it reminded you of it.

      If you decide to implement it FeliciaM, come back and let me know how you get on.

      Thanks for stopping by and commenting.

    • FeliciaM profile image

      FeliciaM 6 years ago from Canada

      Wow, what a reminder! We used to this method yeaarrrss ago...maybe it's time to bring it back to my household. Thanks for the gentle reminder!