The envelope budgeting method is a budgeting strategy where you allocate a specific amount of money to different spending categories and physically keep the cash for each category in a separate envelope. This method can help people stick to their budget by physically limiting the amount of money they have available to spend in each category. It can also help people become more aware of their spending habits and make more mindful decisions about how they use their money.
To use the envelope budgeting method, you'll need to do the following:
Identify your income: Determine how much money you have coming in each month, including your salary, any additional income sources, and any windfalls or bonuses.
Set financial goals: Decide what you want to achieve with your money, whether it's paying off debt, saving for a down payment on a house, or building an emergency fund.
Determine your spending categories: Think about your regular expenses and divide them into categories such as housing, utilities, transportation, food, entertainment, and so on.
Allocate your money: Based on your income and financial goals, determine how much money you'll need to allocate to each spending category.
Create envelopes or use a budgeting app: Use envelopes or a budgeting app or software to track your spending and make sure you stay on track with your budget.
Some people find the envelope budgeting method helpful because it allows them to see exactly how much money they have available to spend in each category, and it can help them avoid overspending by physically limiting the amount of money they have on hand. However, it can be time-consuming to track your spending using physical envelopes, and it may not be practical for everyone. There are also budgeting apps and software available that can help you track your spending and stay on budget without the need for physical envelopes.