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Why Using the Envelope System Makes Sense

Why Using the Envelope System Makes Sense

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Do you have trouble controlling the amount of money spent on variable expenses, such as groceries and entertainment? For many people, the reason it’s easy to overspend on these expenses is the use of debit and credit cards. For some reason, when we use debit cards we don’t really consider the amount of money being spent. When we use cash, however, we are much more conscious of what we’re forking over. This is why many people turn to the envelope system. But, what is it and how can it save you money?

What Is the Envelope System?

The envelope system is designed to help people spend a fixed amount of money each week or month on variable expenses. The way it works is you set aside money in an envelope at the beginning of each pay period. You want to set up an envelope for each expense. For example, you might have an envelope for groceries, gas money, eating out, and entertainment. As you go through the week, or month, you spend money from the envelopes. When the money runs out, you stop spending until the next pay period.

How Can It Be Used to Save Money?

The reason the envelope system works and saves you money is that you’re only allowed to spend a certain amount. For this to really work, you want to leave your debit and credit cards at home and rely on what’s in the envelope. In other words, you won’t have a choice but to stick to the amount of money you have. This causes you to be much more conscious about what you’re spending and to look for ways to make the money go further.

What Happens to the Leftovers?

Once you get the hang of the system, there’s a good chance you’ll have picked up so many tricks to make the money go further that you’ll have money left over. This money can be set aside for months where you have additional expenses, such as the holidays. You can also put the money towards paying off your debt. You could even use the money to save towards a large purchase or a vacation. Just put the money to good use so that you’re motivated to stick with the system.

The envelope system is one of the easiest things you can do to help curb spending. Whether you overspend on groceries or eating out, this system makes is much harder to overspend, especially if you leave those debit and credit cards at home. Try it out with just one expense and see how much it can change your spending habits.

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