Tips On Budgeting: The Highly Effective Envelope System

By MySpendingPlan.com Editorial Staff

There was a time when the envelope system of budgeting was used in many American households.  This system was a very effective way of managing the household budget and helped people with debt relief.  The system went something like this: create a separate envelope for different household expenses such as food, travel, etc., allocate expenses to the different categories according to one’s income, put the allocated money in its respective envelope, and then use the money from a particular envelope to pay the corresponding bills.

With the handy envelope system of personal budgeting, people always knew exactly how much money they had spent on different things and how much money they had left over to tide them through the month or put into savings.

Here’s a working example of the envelope system of budgeting:

If a person’s annual expense for, say, electricity was $1,200 and they were paid a monthly salary, then they would put $100 into the envelope set aside for electricity each month.  Even if some month their electricity bill was more than $100 and some less, they always had enough money to pay their bills.  Similarly, the envelope system of budgeting worked for all their other expenses as well.

Envelope System In The Cyber Age

Although the envelope system of money management lost favor due to modern budgeting methods, it is now becoming popular once again as most Americans are under debt and would like to be debt free.  However, creating physical envelopes and stuffing them with cash each month is definitely not the way to go in today’s age.  This is why we have created an online envelope system here at MySpendingPlan.com.  With our unique and FREE budgeting software, you will be able to make virtual envelopes, stuff them with monetary balances instead of cash, and monitor the balances in real time.

With the help of this unique envelope budgeting system, you will be able to:

• Make better financial choices.
• Spend your money where it should be spent.
• Minimize (or just do away with!) overspending.
• Always pay your bills on time.
• And keep yourself from falling into the debt hole.

Over time, using our unique budgeting software, you will be able to create the perfect personal and household budget and most importantly, spend according to your budget.  Since you will have money to pay your bills, you will not need to borrow money, which in turn will help to keep you out of debt.

However, the envelope budgeting system does have some simple rules.  These are:

• Never forget to or avoid putting the allocated money inside the envelopes (virtual or otherwise).

• If you have used up all the money from a particular envelope, you cannot incur that expense till you have refilled the envelope.  For instance, if you have $200 in your apparel envelope and you treat yourself to a new dress for $200, you simply cannot buy yourself any new clothes till that envelope is filled again.

As you can see, the envelope system of budgeting does involve some determination on your part to stick to the system.  However, when you see the results of your budgeting few months after you have started, and see how you are debt free while your family or friends aren’t, you will be very happy that you decided to use the unique envelope system for personal budgeting and money management.