The envelope system is a tried and true budgeting approach for families who use cash. Here it is in a nutshell:
- Label a physical envelope for each household budget category.
- Allocate cash each pay cycle between the envelopes according to your budgeted amounts.
- Make payments for a spending category using only the cash remaining in the corresponding envelope.
Nice and simple.
Unfortunately, the cash envelope system is also tedious and impractical in today’s digital world.