The envelope system, also known as the envelope budgeting method, is a popular method for visualizing and maintaining a flexible budget. The key idea is to prioritize cash income to meet separate categories of household expenses in physically separate envelopes.
Typically, the person will write the name and average cost per month of a bill on the front of an envelope. Then, either once a month or when the person gets paid, they will put the amount for that bill in cash in the envelope. When the bill is due, the money is taken out to pay for that bill.
This prevents the person from spending the money out of their pocket or bank account, because it is already allocated to the bill.
This is a budgeting mechanism often suggested to people by Dave Ramsey.
- "Envelope Budgeting System".
- "Envelope Budgeting".
- Ramsey, Dave (2003). The Total Money Makeover: A Proven Plan for Financial Fitness. Nashville, Tennessee: Thomas Nelson, Inc. pp. 5. 0-7852-6326-8.
- Dave Ramsey Web Services, Money, Budgeting and Debt Counseling. "Dave Ramsey's Envelope System". daveramsey.com.CS1 maint: multiple names: authors list (link)