Life Hacks: Budgeting and The Envelope System

Harmony (Dust) Grillo Uncategorized Leave a Comment


Budgeting and The Envelope System

LIFE HACKS: Rebuilding Your Life, One Hack at a Time

There’s a big difference between spending money on paper and spending money in real life.


You see, a budget is a nothing more than a tool that tracks and manages your spending.  This first step, creating a budget, or spending your money on paper, helps you to no longer wonder where all your money went. Because the budget is a tool, integrating one into your lifestyle will take some time to fine-tune. Most people have never learned how to create and adhere to a budget, and it never works perfectly right away.  Why would it?  It’s brand new!


Remember, from now on, you’ll be doing this every month.  By spending money on paper at the beginning of each month and becoming more aware of your monthly spending, budgeting will become easier the more you do it.


Now that you have a budget in place, the second step is then figuring out how to successfully spend your money in real life.  To keep your budget on track, spend cash using a method Dave Ramsey calls “The Envelope System.”


With your completed budget, first identify a few categories that would be good candidates for cash.  Things like gas, groceries, coffee, eating out, and entertainment are perfect for this.  Obviously, bills paid online or by automatic withdrawal are not.


Once you’ve identified your cash categories, grab some envelopes, and write those categories on individual envelopes.  In the example above, you’d have five envelopes:








Now fill those envelopes with the budgeted amount of cash.  When you need gas, use the “GAS” envelope.  When there is no more money in the “GAS” envelope, you no longer buy gas. And this is really important: don’t transfer money from one envelope to another.  If you run out of money, be okay not eating out or buying coffee for the rest of the month.


Because your budget and envelope system are working together, this new practice will also take some time to figure out.  Keep at it for a few months.  You’ll start to see which envelope always needs more money.  You’ll also see areas where you don’t spend nearly as much as you thought you would.  Once you start to notice these patterns, change up your budget the next time.  Add a few more dollars to the envelope you overspent or remove a few dollars where you had excess.  And don’t forget to always “zero out” your budget (monthly income minus expenses equals zero).


These tools will help you spend (and save!) your hard earned money wisely, giving you the opportunity to become a better manager.  Go forth, and prosper.



Mathieu Fretschel


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