Budget Strategies: The Envelope System

by Miriam Caldwell | More from this Blogger

25 Sep 2006 08:27 PM

One method of budgeting is the envelope system. This system is incredibly simple to do. It can stop any overspending problems you have and you can easily adapt it to meet your needs. The first person who ever told me about this system was my grandmother. She utilized this method before the days of checkbooks and debit cards. It really does work, and if you have problems sticking to a budget it may work for you.

To utilize the system you take your budget and write the name of each category on an envelope. Then you go to the bank and withdraw the amount of money you need to cover each of the categories. You can set up the system on a monthly or weekly basis. For many people this depends on when they are paid and they set it up according to their own pay periods. The key to making the system work is that once you are out of money in the envelope, then you stop spending money. You can transfer money in between categories to cover unexpected expenses.

This system works really well for the categories that you tend to overspend on. It may be the grocery category or the miscellaneous category or the clothing category. If you find that you only have one or two problem areas in your budget you may want to switch those categories over to the envelope system, and pay the rest of your budget items directly from your checking account.

If you are going to make the envelope system work, it is essential that you do not access your credit cards or debit card to pay any of the categories that are part of the envelope system. It does not matter if it is only a dollar or two, you do not spend it if you do not have it. The envelope system works well for people that have a hard time tracking each individual expense from all the different categories. It allows you to see how much you have left to spend for the rest of the month.

Learn more about Miriam Caldwell

Miriam is a SAHM mom of three children. She has a daughter who is seven, and two sons, four and two. She loves being a parent and spending time with her children.

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Gwyllum (301) 26 Sep 2006 04:47 AM

Miriam, I really like your system. I am a great fan of systems theory and apply it to many areas of life. This would be a great way for reducing the much talked about, dreaded credit card debt. Hope your suggestion helps many people.

Miriam Caldwell (8030) 26 Sep 2006 05:12 AM

Thanks. My grandmother is the one who told me about it. She is now retired quite comfortably. She can travel, and go shopping at the nicest shops and doesn't have to worry. She's been retired for fifteen years. My grandfather worked at a factory, and my grandmother didn't work until her kids were all grown, and then she only worked part-time. They didn't have a lot of money, but because of the system, they were able to be quite comfortable in later years. I know that it can help reduce spending in trouble categories. People just need to try it.