I’ve watched videos about the envelope system, where they withdraw money and assign it to envelopes, while some bills are automated? I’m a bit confused on how this works unless you already have funds set aside for everything. Can someone explain how it actually works? Thanks!
You’re basically using cash for specific expenses, and once the cash is gone, you’re done spending in that category for the month. You could split it into weekly envelopes too, if that helps.
Jaden said:
You’re basically using cash for specific expenses, and once the cash is gone, you’re done spending in that category for the month. You could split it into weekly envelopes too, if that helps.
Does this include things like utility bills? Like electric, water, internet?
@Bin
I did a mix of both. Automated bills (like utilities) didn’t go into my envelopes. I used envelopes for categories where I had a harder time sticking to a budget, like groceries or entertainment.
Yeah, you would basically allocate a set amount for the trickier categories where it’s easy to overspend. That way, when the cash is gone, you know you’re at your limit.
Han said:
Yeah, you would basically allocate a set amount for the trickier categories where it’s easy to overspend. That way, when the cash is gone, you know you’re at your limit.
Ah, got it! That makes more sense now. Thanks!
The idea is to make sure you don’t overspend. So, stuff like utilities or rent can stay automated, but for variable expenses (like food or entertainment), envelopes help you stay on track by using physical cash.
It’s all about discipline. Once that envelope is empty, that’s your signal to stop spending in that category until next month.
Exactly! It’s more of a mental thing too. You become more aware of how much you’re spending when you see the cash physically leaving your hand.