Envelope budgeting is one of the oldest budgeting methods still in use today. But what is it, and how do you start using it?
Known for its longevity, envelope budgeting involves using envelopes to separate different spending categories. Each envelope contains an allocated budget determined at the start of each month or pay period.
For example, if your monthly income is $5,000 and you dedicate $250 toward transportation, you would put that amount in cash into an envelope labeled “transportation.” Spending categories can vary from groceries to savings; you decide what fits your needs. This process is repeated until the monthly budget is allocated down to zero.
The goal of this exercise is to spend no more than the given amount per spending category, requiring meticulous attention to spending.
“What if I don’t carry cash with me?” As our society moves away from cash and becomes more dependent on digital transactions, many financial apps take envelope budgeting online. Check out your app store to find the financial apps that work for you! Some common budgeting applications include Chime, Goodbudget, Rocket Money, and more.
Keep in touch with our next blog to learn more!
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