Budgeting With Envelopes

I would like to know if anyone is using the old fashion method of budgeting using envelopes. I don't know how to set them up and what items to put on them. I thought this would help me control my spending and start paying on my debt and stop living from check to check. I have not even enough money to buy a cup of coffee. I never have money. I get paid on thursday and by friday I am broke. Help me please.


Malmal from Boston

February 18, 20070 found this helpful

My dh and I use the envelope system, and we love it.

Basically you need to determine what catagories you will need.

We have envelopes for:






TOILETRIES(Hairspray, shampoo, toothpaste,etc)


Now what you are doing is putting in each envelope what you have allowed from your paycheck.

For ex. if you have allowed $80.00 for groceries, you want to put exactly $80.00 in that envelope and only take that and a calculator to the store with you. You need to leave the checkbook/debit card at home. Your goal is to only use a check book for your bills and not to use a debit card any longer. If you cannot pay for it with the cash that you have saved up then you may need to wait a little longer to buy it.

Here are the next steps, after you leave the grocery store, if there is any money left over, you put it back in that envelope along with the receipt and write it on the front of your envelope. You want to keep a log of your expenses so actually see where every penny is going.

If you put exactly in your envelopes what your budget allows, you should be able to hopefully save some money along the way.

I am sorry if I am just rambling, if you don't understand or need more help please feel free to contact me and I can send more info.

Good luck and best of wishes for you.

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February 19, 20070 found this helpful

I suppose each persons envelopes will be labelled differently. I did this for a while also during a period when money was tight. My envelopes were labelled:



Insurance (Car & Home)

Mortgage (or Rent)

I did have some others also but you basically need to work out what expenses you have on a regular basis. Some of mine were paid monthly and others quarterly.....I worked out what the average for each bill was PER WEEK and each week I'd put that amount into the allocated envelope. Whatever was left I'd use for groceries and petrol/gas. If I was lucky to have anything left over it was up to me how I'd use it.

I hope I've made sense and good luck with setting your system up. It works if set up properly.

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February 19, 20070 found this helpful

We also use the envelope system and I love it! I've been able to slash my grocery bill nearly in half because it forces me to think about everything I purchase.

What I've found that works best for me is to use the envelopes for those categories that I go to a store for, such as gas, groceries, clothing, etc. As SAHM2three noted, I only put the budgeted amount in the envelope and once it's gone, I'm done. This helps me to really track how much I spend for everything.

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February 19, 20070 found this helpful

One of the best paybacks on the envelope system (assuming you keep the envelopes under lock and key so nobody can help themselves) is that if you have money left over in the grocery and gas envies, you can put it in savings! I love the feeling that we have a little something for emergencies. Most financial advisors recommend 3-6 months income, in case of disaster. Another good thing is that you get a solid idea of how much you actually have to spend. Sometimes we overspend because payday seems so rich!

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February 19, 20070 found this helpful

I don't use the actual envelopes. I just write budget on paper and keep track of spending. But I thought you might use this "jump-start" on a budget. Don't spend any money for one week(or longer if you can). Eat food you already have. Pack lunch for work. (It's OK to plan the week before, like making sure there is gas in the car,etc.) It's easier than it sounds and at the end of the week you will have saved almost a whole week's paycheck. I have actually done this, paying only bills due, and not buying anything that wasn't Absolutely Necessary. Thinking that you only have to do it for one week - not the rest of your life -helps. And you'll be proud of yourself after. And pretty soon you'll be ready to do it again.

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February 19, 20070 found this helpful

The envelope system works great. The key is not to borrow from one to another. Update the "budgeted" amount every 3 months. Whatever money is left in an envelope after bill paid divide in two, put 1/2 in the bank and have fun with the other 1/2. I personally think the system give you a sense of accomplishment!

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February 19, 20070 found this helpful

When we were living on a VERY tight budget, we used this system and it really helped. We kept our envelopes standing up in a shoebox, but like somebody else mentioned, you might want to keep it under lock and key for safety's sake.

We went through past bills to determine what were recurrent expenses (those were usually very close to the same amount each month) and made those envelopes out first, writing the amount to be put into the envelope on the outside: Tithing, rent/mortgage, power, natural gas, water, trash, phone, car fuel, car insurance, renter's insurance/homeowner's insurance. Then we started fleshing out the "other stuff" that comes up that is also important to consider, or could be less predictable/more flexible: haircuts, postage, food, car maintenance/repairs, home maintenance/repairs, emergency, clothing, savings, gifts, entertainment.

We figured out how much our varying insurances cost each year, and divided that number by the number of paychecks coming in, and put that amount in the envelope so that the funds would be ready when the bill arrived. We did the same thing with home maintenance/repairs, car maintenance/repairs, gifts, clothing, postage (we always spent more on this around the holidays and to send birthday/mother's day/father's day cards to our parents). We even figured out how many haircuts my husband and I would each need throughout the year, and divided that up too!

When we took money from the envelope, we put in a slip of paper noting how much we took out. When we had money to return to the envelope (such as after a haircut or grocery shopping), we put in the receipt for funds spent, and noted on the slip of paper how much we had spent, how much was returned to the envelope, and what the new balance in the envelope was.

Our process may sound a bit over the top, but it really helped us to figure all this out so that expenses didn't "sneak up on us" and blow our budget. It also make us really accountable for where every single penny went.

When we got paid, we went to the bank with a list of how we needed to have our money broken down. We would give the teller a list of how many twenties, tens, fives and ones (and even quarters, dimes, and nickels!) we needed so that we could divvy up the money exactly as we needed it.

As we planned our budget together, we realized that entertainment might mean we would invite other couples over for popcorn, lemonade and board games instead of going out to eat or see a movie. We realized that it would be better if we did our own oil changes instead of taking the car to the mechanic. We realized that we needed to prepare our meals from scratch instead of using as much prepared foods. We cut out soda. We set some limits on how much we were willing to spend for birthday and Christmas gifts for our family. It made us think hard about how much we really needed in the way of clothing.

When my husband was in the military, our medical and dental coverage wasn't something we needed to make budget envelopes for, but now that he's no longer in the service, that's something that we have to budget for so that we can meet our co-pays when we need to see the doctor or fill a prescription.

Someone else mentioned being able to limit expenses for a week to build up some funds to help to get this process going. We found it helpful to get a month's worth of funds built up so that the instant a bill came in, we could pay it right away, and not have to wait until the next time the envelope received a deposit from the paycheck. It feels so great to be able to pay your bill the same day it comes!

It takes thoughtful and careful planning in order to stretch each penny to cover the necessities. You have to think creatively to find ways to "make do" when funds are tight. Learning these habits early will be a blessing to you for the rest of your life.

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February 20, 20070 found this helpful

These stories take me back...to 1964, my husband made , brought home $50 a week. Our rent was $50. a month...I was allotted $10 per week for groceries, I knew the price of everything and only bought that. I put $12.50 a week in the envelope for the monthly rent, everything included in those days. We had one other very small bill and other than that we had nothing left most of the time. We did not even get chips, soda, etc.

Fortunately, not long after he got a better paying job and things got better.

Can you get a part time job in addition? Maybe you could get a better paying job. Sometimes that is possible and certainly would help.

Things will get better for you, mainly because you are TRYING to do something about your situation.

Good Luck

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February 20, 20070 found this helpful

When our children were born, in the 70s we used this system but I

didnt know there was a name for it. I did it this way so I was sure

to have the bill money. Sometimes somehow I would end up with $5

extra. I was so happy to be able to save that. I had one extra envelope labeled extra money. Even if there was .25 extra it went in

there. In those days my husband earned $4.50 an hr. Our rent was

$125 a month. I would buy a roast and cut it in thirds to get 3

meals worth. A pound of hamburger was 2 meals.. etc etc. We had to stretch as far as we could.. we drank kool-aid so we had milk for the baby.. milk was .88 a gallon. And like another poster,

I knew the price of everything and only bought exactly what was needed. Gas was .28 a gallon an my husband being a smoker his

$5 a week allowance didn't last tho his cigs were .33 a pk. Funny now to think how we would always get $1 worth of gas and it lasted most of the week. I remember a station in town saying

*you know one day gas will be $1 a gallon*.. I would just twirl my eyes and think .. yah right. But somehow we survived. And I might add we never ever even thought of borrowing money from anyone.

One reason I love this site is because there are always posts

that take me back to yesteryear. Its so hard for young people these days. We help our children as much as we can.. we are always reminded that if someone had helped us maybe life would have

been somewhat easier. Thanks for the memories.

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February 20, 20070 found this helpful

My Mom loves to tell me about how she used to budget with envelopes because her and my father were very poor. First, get a stack of envelopes and write down what you spend your money on starting with necessities like rent, utilities, gas, food, debts you owe, etc. Use only one category per envelope and also write down the amount you need for each one. Then you can write down your "other" envelopes.

Be specific and remember to use only one category for each envelope. Starbucks, clothes, shoes, eating out, going out/entertainment,etc. Now, cash your check. Go through each envelope starting with your necessities first and put the amount of money written on the front inside the envelope. Make sure you do these first then move on to your "other" envelopes...

If there is money left over, decide how you want to spend it and STICK TO IT! If you start shuffling money from envelope to envelope, you may as well stop. Once it goes in, it only come out for the reason on the envelope.

This will not only help you budget your money, it will show you how much you waste without even knowing it because when you stop to get something you have to take the money out of an envelope to buy it and you will stop and think. Also, pay off your debt before you go out shopping. You will feel great debt free and actually start saving money once you see where it is going!

It worked for me... Good Luck

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In This Article
Budgeting Tips and Tricks
Budgeting Tips and Tricks
Budget & Finance BudgetFebruary 18, 2007
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