The ENVELOPE METHOD
to limit & control spending
Do you find you’ve spent all of your money within a few days of getting paid? Do you often “rob from Peter to
pay Paul”, just to get through the month? Do you know where your money goes?
To stop overspending and to control the flow of money for daily expenses, we suggest the envelope method.
This method involves putting your spending cash into marked envelopes, spending as you need it and when the
cash is gone…you’re done spending! Here are 4 easy steps to implement the process.
Step 1:
What’s your spending allowance?
How much of your monthly income is left after you subtract all necessary living expenses? Divide the “leftover”
into a weekly allowance to cover all of the variable day-to-day expenses, such as food, gas, dining out,
entertainment, shopping, laundry, pet supplies, hair care, postage, etc… Assess your budget and give yourself a
weekly allowance for all “out-of-pocket” spending.
Step 2:
Create envelopes for your 4 or 5 biggest spending categories.
Where do you spend the majority of your money? Food? Gasoline? Toiletries & household goods? Pet Supplies?
Entertainment & fun? These are often used, but you may consider others, such as: school activities, tithing, hair care,
cigarettes, dining out, books, or whatever you feel is important in your life. Label some envelopes with your top 4 or 5
spending categories.
Step 3:
Divide your cash allowance between the 4 or 5 envelopes.
For example, if you have $200 for your one week allowance, you may divide it like this….
$80
Food
$55
Gasoline
$30
Toiletries
Household goods
$25
$10
Entertainment
Fun!
Misc
When you need food or gas, pull money from that envelope, but watch your spending to make it last!
Step 4:
Stop spending when the envelope is empty!
This is where budgeting really begins. If your food envelope is empty and you’re craving French fries, you may
have to wait until you get your next allowance - - curb the craving, as this is not a need! But, if your gas
envelope is empty and you need to get to work, you may have to borrow from another envelope because you
need to get to work so you can earn your next allowance. Be realistic, but start to adjust your spending as you
see the money disappearing.
The first few weeks will be hard. Things may get cut from the budget. You may find that the envelope is empty
within a day; but this is the process that will get you on the right track to control the spending and eliminate the
overspending. Once you see how fast the money goes, you’ll start to make spending decisions differently.
You’ll plan a bit more…be less compulsive about your shopping…or you’ll start to plan for those bigger
purchases. You’ll start to control your spending, instead of letting it control you!
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