Wednesday, April 11, 2007

Envelope Budgeting

This information was found on This is one of my favorite websites.

Envelope budgeting has been around for a very long time.
Even if you've never used it personally, you probably recall your mother - or even your grandmother - tucking cash away in individual envelopes each payday.

Unfortunately, in today's mostly cashless society, envelope budgeting is simply not as effective as it once was. However, with some planning, it can still be used to assist you in keeping to your personal budget.

Let's begin with Envelope Budgeting 101. The concept is easy - you take a stack of envelopes and write a spending category on the front of each one. They might look something like this:
1. Mortgage/Rent
2. Utilities
3. Gas
4. Groceries
5. Entertainment

You may have more categories - it's your budget, so you get to label them however you want.
Once you've separated your finances by expense type, you figure out how much you are allowed to spend in each, and you put the corresponding dollar amount in the correct envelope.

If you go to the movies, you pay for it out of the entertainment envelope. When you run out of entertainment money; you're done until the next month, when you get to fill up the envelope again. It's a nice system and definitely helped many a family stick to a fixed spending limit.
If you're comfortable carrying cash around with you, it can still work exactly as outlined; however, if you're like most people and rarely even have a dollar bill on you, it's time to revamp the envelope budget. This can be done in a couple of different ways.

You can create a spreadsheet, or chart, with each of your expense categories in a separate column, and beneath it the total dollar amount you're budgeting for the month. When you pay your rent, deduct that from the rent column. When you go out to dinner, save the receipt, and deduct that from the entertainment column. If you're religious about saving receipts and recording your expenditures when you make them, this system will work quite well. When you've used all your allocated funds in one area, you are out of funds until the following month.
Another option is a mixture of the two. You can use the chart/spreadsheet for fixed payments, such as your mortgage, and other normal house expenses, such as utilities. Then you can use the envelopes for entertainment, groceries, gas, etc.

There are benefits to this mixed approach because where most people fail on their budget isn't with fixed expenses, but the fun ones, like buying clothes or going out to dinner. By having the cash already set aside, when it's spent, you have an empty envelope, and you can't get much more of a visual reminder that you're out of cash!

With some tweaking, and self-control, envelope budgeting can still be an effective tool in managing your money. Regardless of what type of budget you use, be sure to be honest about your income and expenses so you don't end up in the red at the end of the month.

Note for Lucy: I have a friend who uses this system of budgeting completely with cash. She carries around her envelopes everywhere is goes. When she uses up the money in an envelope, then she puts it into a drawer at home until doesn't see it again until the next payday. If any money is left over, in the envelopes at the end of the month, she put's into savings. She says she saves about $2,000.00 a year doing this. In a way I do with with certain bills. I give myself $ 100.00 a week for groceries and if it is gone before the next week, then I don't shop. I started doing this in a year when our income had gone down for a while and I HAD to do it. It has worked so well that I continue to do it today. This might be worth a try if you have had a hard time budgeting in other ways. It does take will power, but it is worth it.

Layered Enchilada Casserole
Courtesy of our free Healthy Crockpot Recipes Newsletter from

1 14.5-oz can whole tomatoes
1 small onion, cut into pieces
1 clove garlic, minced
1/2 tsp ground red pepper
1/2 tsp salt
1 6-oz can tomato paste
1 pound ground beef, browned
2 cups cheddar cheese -- shredded
9 corn tortillas

To prepare sauce, blend whole tomatoes and their liquid with onion and garlic in a blender or food processor. Pour into medium sized sauce pan. Add red pepper, salt and tomato paste. Heat to a boil; then simmer for 5 to 10 minutes. Place 3 tortillas in bottom of crockpot. Layer on tortillas 1/3 of the ground beef, 1/3 of the tomato sauce and 1/3 of the chedder cheese. Repeat each layer two more times. Cover and cook on Low 6 to 8 hours.

One more note: TF is still in a lot of pain and we are still trying to figure out what to do. Keep praying for him...Thanks!


At 3:23 PM, Blogger nuch a chosid said...

great plan, when u have a stable income...

At 4:55 PM, Blogger SusieQ said...

Lucy, I used the envelope method when our family was young and we were struggling to make ends meet. It was helpful.

I still use a version of that today with my Quicken software. Each month I segregate from our Quicken checking account and place in separate Quicken accounts a specified amount of money to cover major expenses such as our upcoming real estates taxes and our quarterly estimated tax payments. These are big bills and I want to make sure the money is there when the time comes to pay them. This little accounting trick has helped me to stay on top of it.

Sorry your husband is still having his health problems. My husband is too. Next week he has an appointment with a kidney specialist to find out if his kidneys are not functioning properly and causing the edema in his legs.

At 6:37 PM, Blogger DayByDay4-2Day said...

intersting concept/

At 7:11 PM, Blogger Big Dave T said...

I remember when my wife and I were first married, we had no choice but to adopt a strict budget similar to the "envelope system." Just learning how to budget and be frugal is something that will hold you in good stead the rest of your life.

So many people these days don't know how to budget at all it seems.

At 11:42 PM, Blogger Mountain Mama said...

I never did it that way. I have a book where I keep track of everything owed, and when it's paid. I do bills the first of each month. I never charge and refuse to own a credit card, I save and use that for those unexpected things that po[p up. So basically just have household expenses, insurances and basic living expenses. It works for me.
I like the sound of the recipe. Gotta give it a try!

At 12:49 AM, Blogger Lucy Stern said...

nuch a chosid - Good plan anyway.

susiq - it does work. I think that each family is different and they have to come up with what works for them...Glad Quicken is working for you.

I wish your husband luck in finding out what is wrong with his legs...I hope it is not his kidney. One good thing we found out is that TF does NOT have Hepetitus (not spelled right). He still has to go back and get another MRI so that they can take a better look at his liver.

daybyday - It does work.

Big Dave - two of my kids know how to budget and the other one could care less...I suppose that he will grow up, one of these days. I have always been pretty good at budgeting.

mountain mama - Like I said, "Each to his own" or "Whatever works". The recipe is on my list for next week.

At 2:49 PM, Blogger A Red Mind in a Blue State said...

Thanks for bringing back some great memories for me! My grandparents used the envelope system--so did my parents for a bit-- and I did, too, back in college.

Good job, as always!

At 9:56 AM, Blogger A Red Mind in a Blue State said...

Sorry, Lucy--I didn't read the prior post until just now--and must have missed the note about TF-- Please give him my best-- you both are in our thoughts!

At 9:51 PM, Anonymous Emily said...

I would just like to bear my testimony that I know the envelope budgeting system is true. we did it for several months at the end of college and it sure does keep you honest. when you're out of stop spending. And I think it's harder to hand over your cash than it is to swipe your plastic. this is a neat site...thanks :)

At 2:23 PM, Blogger Evey said...

The enchilada casserole sounds yunny. I am going to have to try that.

Keeping TF in my prayers. I sure hope you guys are starting to get some answers.

At 8:14 PM, Anonymous Jesse said...

I'm a fan of's method -- even for those with a variable income (directed at comment #1). ;)

At 6:01 AM, Anonymous BJ said...

I'll paint you a rainbow as a gift from me,

Then hang it from heaven for the whole world to see.

On a canvas of love I'll cover your fears,

With a soft brush I'll dry all your tears.

I'll paint you a rainbow with feelings so deep,

My stroke will be gentle, my touch you may keep.

On a palette of words I will tenderly blend,

Colorful thoughts with bright verses to send.

I'll paint you a rainbow in reds, blues and gold,

Stretched like loving arms ready to enfold.

And deep in the center of the most vibrant hue,

I'll etch from memory the essence of you.

I'll paint you a rainbow, a bridge to my heart,

So loneliness and pain can begin to depart.

Just look up at the sky when life hits a bend,

I painted a rainbow for YOU.

At 2:43 PM, Blogger Oh great One said...

Now THAT'S a recipe I could get my hubby to eat! It sounds yummy. As for the kids...well...not so much. A picky family can make you nuts!

At 9:24 PM, Blogger DayByDay4-2Day said...

I've been thinking about this and ... I figured you have the have the whole months money in advance in order to get started. I don't think I'll ever catch up.

Funny... my word verification says

At 9:33 PM, Blogger Live, Love, Laugh said...

this sounds like a great idea, I am gonna try it!! I heard of this once before from someone else, but they never really explained exactly what they were doing.

At 6:51 AM, Blogger Merle said...

Hi Lucy ~~ The envelope budget seemed to work when I was younger with little money. Great idea.
Thank you for your comments about the photo of Kathy and me. Yake care,my
friend, Love, Merle.

At 8:13 PM, Blogger Rachel said...

I have heard of this before. I just try to watch things and I generally pay bills pretty much when they come in or at least in a day or two.

Thanks for the update on TF. I have been wondering what was going on. I'll continue to pray.

At 9:10 PM, Blogger DayByDay4-2Day said...

let me know how this health food doc thing goes.

At 8:29 PM, Blogger Fred said...

Sorry to hear about TF, Lucy, I hope he's doing better. We have a prayer team at church and I'll be sure to bring up his name for some positive thoughts.

I need to catch up and read all the posts I've missed.

At 9:44 PM, Anonymous nettie said...

I'm a fan of the spreadsheet variety.

At 7:08 AM, Blogger Leslie said...

I've tried that envelope budgeting thing once, then I lost all the envelopes.

That recipe sounds good, and I can't wait to be able to eat Mexican food again!


Post a Comment

<< Home