One of the oldest methods of budgeting is using envelopes. The envelope system is also
known as “clip” method operates by categorizing the expenses and tucking the money in
different envelopes.

Things to remember when doing the envelope system:

#1- Every payday, set aside your budget for each expenditure.
Generally, budgeting includes groceries, gas, utilities, savings, entertainment, daily
allowance, and miscellaneous. If your budget for groceries is $500 per month, put $250 on
the 15th then another $250 on the 30th. Each time you do your grocery; get cash to pay for
it. Put the change inside the envelope.

Same goes to your other envelopes. You get a certain amount to pay for your bills,
recreation activities, gasoline, and etcetera. If you deplete your allotted budget for one
expense, stop spending and wait until the next payday. It helps you curb your bad spending
habits.

#2- Do not cheat.
It is easy to get cash from one envelope and use it to fund another expense. However, you
must remember that the objective of the envelope system is to help you stick to the budget and
prevent overspending.

If you are running out of money for gas, avail of the carpool or plan your trips. If your
grocery money is low, dig through your pantry and look for canned goods or check the
leftovers in your fridge. Learn to stretch your budget without borrowing from the other
envelopes.

#3- Reward yourself.
If at the end of the month, you have money left in any of the envelopes, congratulations!
You can spend within your budget and under-budget. Reward yourself like buy your
favorite coffee or roll over the money as additional budget. Rewarding yourself for small
wins keeps you more motivated to manage your money well.

Once you get into the habit of using an envelope system, your budgeting practices will be
better than ever.

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