How to Use Envelope Budgeting

Updated on April 18, 2020
RGraf profile image

Rebecca Graf is a trained accountant who worked in the field for more than 20 years.

Budgeting is important in everyone's life. All businesses do it. They need to in order to be successful. It is a guideline for financial success. That also means it is a great idea for individuals.

There are many ways to budget. Not all methods work for everyone. One that can work for many is called the envelope method. It is simple and helps everyone involved to know exactly where they stand.

Understanding the Concept

Here's how the envelope budget works in a nutshell. Get a number of envelopes. Label each one with your budget category. Write the dollar amount of that category's budget for each month or paycheck. With each paycheck, put in the designated amount. When you have to spend from that category, pull from that envelope only. Not enough money? Don't spend it.

Start With a Budget

Create a budget. All budgets are unique to each individual. Get a pad of paper and a pen. List out all your incomes and expenses. Here is an example of how it works.

Let's say you make $2000 a month. That is the total dollars you bring home every month whether it is bi-weekly or weekly. That's your income.

Now, look at your expenses. List out all those you have to pay in order to survive. That would be your rent/mortgage, utilities, car payment, gas, food, internet, and insurance for a few of the most common. What do you have left over after those expenses? If nothing or not enough, you need to find either more ways to bring in income or to cut expenses. That is a topic for a different article.

If there is money left, note how much you can spend on entertainment, clothing, or to put aside for a trip or a new laptop. The ideal budget equals zero with anything "extra" used as savings.

Be Realistic

This is a big problem with a lot of people. They are completely unrealistic in their budgeting. Do not put your entertainment expense at zero or ten dollars a month. Can you really go without spending money on a movie or going to the bar with friends for the entire month? Most of us need a little entertainment now and then to save our sanity. Make sure you are realistic on how much you need to spend in each category.

Also, keep in mind that some expenses don't occur every month. If you can avoid going to the movies or buying clothes every month, still put something aside with each paycheck. It might only be a dollar, but those dollars add up. Then when you need a new pair of shoes, you have some money set aside for it.

Implementing the System

You have your budget laid out. Now you take the envelopes and write a category on each one as well as the dollar amount you need in it to pay that bill. Also, note when the bill is due so you don't forget and get charged a late fee. Get a shoebox or something similar to store them in and then put in a safe place. When you get paid, take that paycheck and divide it up among the envelopes where they need to do.

When it comes time to pay a bill, take the money out. If the bill is less than you expected, put the extra money back in the envelope for future use. You might budget $80 a month in gas you will need to get to and from work each month. Due to changes in gas prices, you might actually only spend $75. Put that $5 back in the envelope as next month the prices might increase. Remember to be safe rather than sorry.


This is a very rewarding experience if it works for you. You'll become more disciplined in how you spend your money. Money will stretch further as you can physically see where it should be. Putting a budget down and trying to follow it virtually can be disastrous for many people. Physically managing your money can be very beneficial.

Give it a try and see how it works for you. Not every plan works for every person. You have to give it a shot and see if it is the right fit.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2019 Rebecca Graf


    0 of 8192 characters used
    Post Comment
    • Carb Diva profile image

      Linda Lum 

      12 months ago from Washington State, USA

      This isn't new--it's the Dave Ramsey method. Most people pay bills online, so other than groceries, gas, and entertainment, how does this work?


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)