What is the Envelope System?

Answer:The envelope system is a very basic – but effective – approach to budgeting. To employ the system you divide your income into various spending categories, and then create and fund an envelope for each one. You then spend out of the appropriate envelopes until the money is gone. The envelope system is a method our grandparents and generations ago used. A system that is starting to fade away - this is a system I use and I am 43 years old.

Benefits of the Envelope System:

• easy to set up and use
• relies on cash, not credit
• provides a simple way to keep track of your money
• prevents overspending