Envelope Budget System

Never heard of the envelope budget system? Looking for a time-tested budgeting system that costs nothing to start?

You could be excused for not knowing what the envelope system is but ask dear ole Grandma and she'll tell you all about it. Its what she's been subtly trying to teach you all along - how to manage your money the old fashioned way.

In Grandma's day people used to pay all their bills and expenses with cash envelopes. The mantra was simple - you can't spend what you don't have. The envelope system was a surefire way to prevent people from living beyond their means.

Think you might like to give the envelope budget system a whirl? Here's how to set up your own envelopes budget.

Envelope Budget System: Step-By-Step

1 Create your envelope categories - Assuming you already have your budget in place, the next step is to create your envelope categories. In the traditional envelope budget system you would have one envelope for everything that required money, anything from expenses to savings. Alternatively you could use just few broader envelope categories such as 'Food', 'Transportation', 'Entertainment' or 'Miscellaneous'.

2 Allocate funds to envelope categories - Use your budget to determine how much money is needed for each envelope. Add it all up. For every envelope category write down the exact denominations you will need to fund that envelope. Withdraw the total amount of cash need to fund all your envelopes. Get the right change or denominations, use exact amounts, try not to round up or down.

3 Fill envelopes with allocated funds - Again you want to use exact amounts here. Then store your envelopes in a secure, private place under lock and key.

4 Live on the cash in your envelopes - Pay your bills, shop, invest, feed your savings account and have a ball using nothing but the cash in the corresponding envelopes. When the money's gone you shouldn't spend anymore money on that category. If this happens a few times you might want to consider allocating more money for that category.

TIP: You can transfer money around from envelope to envelope if needed but you should never ever resort to using your debit or credit cards.

Internet Version of the Envelope Budget System

Eventhough the time-tested envelope system is still a simple and effective way to manage money - for alot of people today it's just too impractical. That's Okay! because now the envelope system has joined the information age and is now available online. Even Grandma would approve!

Check out the web edition of the envelopes system if you prefer the modern-day, internet version over the traditional envelope budget system.

The online version of the envelope system combines the speed, convenience and accessiblity of the internet with the simplicity and practicality of the traditional envelope budget system.

Here are some of the pros and cons you should be aware of if you are considering taking the online envelope budget system for a test drive.

PROS:

• Speed and convenience - By far the biggest selling point for me was the ease and speed with which I was able to manage my personal finances. All your bills and debts accessible in one convenient place from anywhere at anytime (provided you have an internet connection of course).

• Easy debt reduction and payment options - The online envelope system makes paying down debt very simple. It also helps you get out of debt faster than the convential debt repayment plans with the accelerated rolldown system.

• Tracking expenses in realtime - Being able to track expenses almost instantly as they happen is real plus. This also gives you a clearer picture of your spending and gives you a certain measure of control only limited by your own impulsiveness.

• Pay all your bills online - Again, being able to pay monthly expenses all from one convenient application was an extreme time and money saver.

• Secure Integration with your own bank accounts - Because the online envelope system is integrated with your bank account it automatically tracks all your transactions as they happen. Deposits, withdrawals and purchases all instantly updated in the system securily.

CONS:

• The cost - It's not free! There is a free 30-Day trial but after that it costs 11.65/month but well worth the few extra dollars a month.

• Initial setup - I found the initial setup to be a bit of a challenge but was quickly up and running after placing a call for technical assistance.

Still need more information about the online envelope budget system? This Free Budgeting E-book should answer any other questions you might have about the system.

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