When I talk to about the envelope system, most people argue that “If I have cash, I’ll spend it”. In reality, if you only have a certain amount of money in cash to spend over a specific time period, you’ll ration your money more. You have to have a plan in order for the envelope system to work.
How to use the envelope system:
- Use your budget to determine how much spending money you are able to give yourself per pay period.
- After you get paid, take out that allotted amount of money from the ATM.
- Put it in your envelope.
- Spend on whatever you want throughout the next two weeks (or until you get paid next)!
Benefits of using the envelope system:
- It helps you prioritize. Spontaneous Chipotle visits seem less important when you only have $50 to spend for the week!
- It allows you to spend money guilt-free on a variety of activities. I feel zero amount of stress paying for happy hour or a nice dinner knowing that I have money set aside for those occasions.
- It keeps you from over-spending on restaurants and bars. Instead of opening a tab, mindlessly buying drinks all night, and waking up in regret, you (aka your envelope) decides how much you spend (and drink).