Envelope System
ConceptAbout
The Envelope System is a budgeting method designed to help individuals control their spending by allocating cash into separate categories. This approach involves dividing monthly income into labeled envelopes, each representing a specific expense category such as groceries, entertainment, or transportation. By using cash from these envelopes for purchases, users are encouraged to stick to their budgeted amounts, as once the cash in an envelope is depleted, spending in that category must cease until the next month. This system emphasizes mindful spending by making users physically handle cash, which can reduce the likelihood of overspending. It is particularly effective for managing variable expenses and helps in building better financial habits. While traditional methods involve physical cash, modern adaptations often use digital tools or multiple bank accounts to replicate the envelope system's benefits without the need for physical cash handling.
