The Envelope System

EddieWhen I first decided to take steps to manage my money rather than let my money manage me, I performed some concrete actions that unmistakably increased my awareness of money as a tool at my disposal.  One of the first steps I took was to get on the envelope system.  I had to decide how much money I would spend every month and divide that sum into categories.  My categories may have been transportation, food, entertainment, and clothing.  I don’t remember because it was so long ago.  In recent years, I have been disciplined enough to manage my spending without some kind of external procedure.  Now, years later, I still manage my money and I do not need to spend the time to perform the envelope procedure.  So now, I am saving time and money!

Here is how the envelope system works:  Each month, I took my spending money and got cash in dollar bills, divided into each of my categories.  Each category had an envelope with the name of the category written on the front.   For example, I had $80 in the transportation envelope and $300 in the food envelope.  I kept the envelopes in my home.  When I needed to buy some groceries, I went to the food envelope and took out the necessary money.  If I returned with change I put it back in the envelope.  When the money was gone then I was done spending for the month.  If I had extra money left at the end of the month, I could splurge!

Have you had success with the envelope system?

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  1. my husband and I have used a modified envelope system. We don’t do it for everything but honing in on our food budget has helped since implementing the envelope system. We know what we can spend on fast food, restaurants or date nights, and groceries and once the money is gone, we don’t go out anymore or grocery shopping but use our food storage. My favorite time is when you have money leftover and can roll it into the next month – especially for clothing or kids clothes – sometimes, you really need to use more than your budget and other months, not so much. I think it definitely helps the cash flow as you manage your money so that your money doesn’t manage you.

  2. and i thought it was my hubby who invented this! HA! we did the same thing for the first 20 years of marriage…it worked BEAUTIFULLY…so i still use it for a few things and have tried to share with my children….they have not learned yet that this is the only way to manage your money and not have IT manage you!

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