Budgeting: Using The Envelope System
March 2, 2010 | Posted by Brad Chaffee 
Have you tried budgeting only to find yourself overwhelmed by the tracking and updating? You’re not alone. It takes time and patience to manage your zero-based budget, but there is something you can do now, that will make that process easier to manage, as well as help you control spending.
It’s called envelope-based budgeting, and it has more benefits than you may think. One of the greatest benefits to so many is the savings factor. When you spend cash it HURTS! When you use plastic it does not register as pain the way spending cash does. Studies have shown that people spend 12%-18% more when swiping the card.
Levels of Pain
CASH – hurts and causes you to pay more attention to your purchases.
DEBIT – hurts a little because the money you spend is connected to the money you have in your bank account, but still leaves room to overspend.
CREDIT – has very little to no impact on the emotions connected to your purchases. No pain at all—until you get your bill.
Using the Envelope System
Take a look at your budget. Now go down the list and mark off everything that can be conveniently paid online.
Next, mark off anything that you pay using checks. (usually bills that must be mailed.)
What’s left? Groceries, fuel, entertainment etc. right?
Create an envelope for every category that you can use cash to pay for. Write on each envelope the amount you plan to spend in that category for the month.
When you get paid, fund those envelopes, and put them in a safe, secure location. DO NOT carry your envelopes around with you all of the time, it is not necessary, or recommended.
When you head to the grocery store, grab your food envelope, and leave your debit card at home. You can’t spend more than you have on hand right? That is the point.
Use envelopes and save money. Give it a chance…it works!
Brad Chaffee is the author of Enemy of Debt, and a regular contributor here at the Self Reliance Exchange. Brad is currently challenging his readers to give budgeting a try with his Manage Your Money 31 Day Challenge. Learn more about Brad by reading his bio. You may also subscribe to his blog here.
Categories: personal finance | 
Tags: budgeting, control spending, envelope system, self reliance | 
2 Comments »
Keep in mind there are always exceptions to the rule. It hurts me to spend cash, but it doesn’t phase my wife a bit. I asked her and she said she feels nothing. Wow!
Hey there Dustin! LOL There’s always exceptions huh? I can’t wait to share your site with my readers over on EOD!