Now I am going to be upfront with you. I don’t use the envelope system. I probably should in some areas of my expenses but so far I haven’t made myself do this yet. That being said I do bring it to you because A LOT and I mean A LOT OF A LOT OF A LOT of people find this is a very helpful tool to help them.
You have your envelopes labeled in categories and then when you get paid you go ahead and split the money between those envelopes. Then you ONLY use the money in the envelope it is labeled for.
So if you put $200 in grocery envelope this week and $25 in savings. But when you get to the store you end up spending $207 dollars you CAN NOT take the $7 from your savings you have to decide on something to put back until you are at or under your $200 available in your grocery envelope. If you get to the end of the month and you have $0 in Grocery because you played beer pong twice this week and only have tuna left in the cabinet till payday in three days… well you’re going to smell like fish for a few days.
One thing I do note is that even if I do switch to the envelope system my bills are paid online with auto pay. This is okay you don’t have to stop your auto pay and figure out how to pay with cash. But you do need to make sure you have a way to seperate your money into categories.
Also good thing to note just because you only want to spend $100 on your electric bill you still have to pay your full $200 electric bill. So make sure you are honest with your system and put all your bills and monthly expenses down correctly. If you want more money for your fun envelope you’re going to have to find ways to cut and save for it.
Each paycheck put your alloted money in the envelope if you have leftover money leave it in the envelope it just means you have a little extra that month you can spend. If you find extra in the same envelope every month relook at other places you are struggling and see if you need to change the amounts you’re putting in the envelopes or move the extra money into your savings account.