What is envelope budgeting? Why should you bother about it?
What's the story
Envelope budgeting is a simple, but effective way to keep a track of your personal finances.
The method includes assigning a specific sum of money to different spending categories, each represented by an envelope.
This makes it easier to track expenses and avoid overspending.
Using cash/digital envelopes, you can have a better grip on finances and move towards financial freedom.
Let's see how to use it.
Step #1
Categorize your expenses
To begin with envelope budgeting, first, divide your expenses into necessary categories like groceries, utilities, transportation, and entertainment.
Then, assign a specific amount of money to each category according to your monthly income and priorities.
This way, you'll ensure that you spend the right amount of money and have an even budget throughout the month.
Step #2
Use cash or digital envelopes
Envelope budgeting can be done by either using physical cash envelopes or digital apps that mimic the process.
Cash envelopes provide a hands-on way to manage money, while digital options offer convenience and tracking features.
Pick the method that suits your lifestyle best to ensure that you adhere to your budget plan consistently.
Step #3
Adjust allocations as needed
Life happens, and circumstances change. It's only fair that you adjust your budget allocations when needed.
If you're always overspending in one category but never touching another, reallocate it.
Flexibility in managing your envelopes makes room for more realistic financial planning, without losing sight of your overall goals.
Step #4
Track spending regularly
Regularly tracking what you spend is key to successful envelope budgeting.
Keep your receipts or use apps to note every transaction within the limit of each category.
Monitoring how you spend helps you identify areas where you might need improvement or room for adjustment in future budgets.