Monthly Archives: December 2016

The Envelope Method Revisited

A while back I wrote about using the envelope method to help manage expenses and cash flow. Because I believe in simplicity, there may be a simpler way to use this powerful method.

First, a background on the envelope method: I started using this method when I was a teenager through the guidance of my father, and later read about it in one of Dave Ramsey’s books. Basically, the envelope method requires that you set aside a portion of your income in cash between multiple envelopes for your expenses. This helps you to budget for your expenses, decrease wasteful spending and debt, and even out the ups and downs of your cash flow. Do not scoff at this method, as it applies regardless of your income.

Although you can set aside cash for all of your expenses, the most practical way is to set aside cash for your variable expenses that you can easily pay cash for. This includes expenses such as groceries, gas, clothing, dining, and spending/miscellaneous expenses. Other items can be automatically deducted from your paycheck or checking account, such as saving for Christmas gifts and vacations, and automatically be deposited into a separate savings account.

Also, to make the envelope method easier to follow, you should try to keep the number of envelopes to around five. I actually recommend writing the date, amount contributed or spent, and the balance on each envelope. For a sample envelope, you can email me and I will send you a sample as a Word document.