Finance Tip of the Day

Envelope Budgeting System and Why it Works!

  • 2018 2 May
Envelope Budgeting System and Why it Works!


Envelope Budgeting System and Why it Works!

The envelope approach to money management has many advantages.

First, you are spending only from cash you have on hand.  

Second, you are setting money aside each month to meet periodic spending requirements. That way, when you take a family vacation, or purchase holiday gifts, the money is already available.

Third, you are always spending from a balance remaining, which means you always know how much you can spend without impacting other areas of your plan. When the money is gone, you have two choices:  (1) transfer cash from another envelope and spend less in that area, or (2) wait to spend until you allocate more money to that envelope next month.

These three advantages form clear distinctions between this method of money management, and every other approach. Following this paradigm completely eliminates the creation of consumer debt and allows you to begin saving and investing at levels you likely never thought possible.

Today's tip brought to you by Mvelopes and Money4Life Coaching.