Save Money With The Envelope Method

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Save Money With The Envelope Method


The envelope method has been around for a long time and has helped many stick to their budget.  You may not have heard of the envelope method with all the apps and websites around these days.

I think that this method works so well because it is visual.  You actually see your money leaving and you may think twice about throwing away five bucks on that latte.

Even better, you see your saving grow by giving up that same latte when you opt to make your own coffee at home to keep that cash for your savings. Visual reminders of why you are doing this is a great motivator to keep you on track.

Cash is King

The envelope method is designed to use cash to pay for purchases.  This may be hard at first if you are the type of person who normally always use your debit.  

You can still use it to pay for fixed monthly expenses, but you should use cash only for all variable expenses such as clothing, groceries and entertainment.

How the Envelope Method Works

The envelope method works in conjunction with your budget.  Use one envelope for each of your variable expense categories. You can also use a small accordion file to make it easier.

If you get paid weekly, deposit the money designated for fixed expenses into your checking account and take cash for what you have designated for variable expenses.  Put ¼ of the designated amounts into each envelope.  If you get paid bi-weekly you should put ½ of the amounts in each envelope, you get the idea.

The goal is to not use more than you have designated for each category for the timeframe allotted. Do not dip into one envelope to pay for expenses for another category, this defeats the purpose.  The money in each envelope has to last until the next paycheck.

Unlike using apps or other methods, the envelope system is in real-time so to speak.  With those other methods, you record how much you have spent after the fact, by then, the money is already gone.  There is nothing you can do about it if you realize that you have overspent after the fact.

It might take a little while to get used to this method especially if you are not very disciplined with you money. Once you get used to using this method you will get motivated to keep more of your money.

Think of what you can do with the money might have left in your envelopes at the end of the month.  You can throw the money into you debt repayment plan, emergency saving or your vacation fund.

Recap of How the Envelope Method Will Save You Money

  • It will keep you on track with your budget.
  • It will teach you to live within you means
  • It will prevent splurging on non-essentials
  • It will remind you of why you are working so hard to make ends meet
  • It helps you see exactly where your money is going
  • I encourages you to keep some money in your envelope for other purposes you did not think you could work into your budget.
  • It keeps you accountable about where your money is going

Try out the envelope method for a two or three months to see how it works for you.  I’ll bet it will keep your spending in check and you will have more money left over at the end of the month.

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Please leave a comment to let us know how the envelope method works for you or if you have any other tips to share.

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