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How the Envelope Money Saving System Works




By Stas Bekman.

Published: 16 July 2006

How the Envelope Money Saving System Works

One of the very old money saving systems is called "The Envelope" system. It works as following:

You calculate how much on average you will need to pay for your car, electric bill, telephone, food, rent, etc. and you stash it in an envelope. Depending on whether you get a paycheck weekly, bi-weekly or monthly, deposit that money as soon as you get the paycheck. Take into account any special irregularly payments, that don't occur every month (e.g. car servicing). Once you have put aside that money, you never borrow it. Period.

You want to have a dedicated envelope for each expense, so you don't overspend other budgeted resources. Once the money in any of the envelopes is spent you can't spend more to get more of the same thing. You can't borrow from other envelopes or it'd defeat the purpose.

You can find quite a few people who use this technique very successfully. I suppose the main problem with this system is that you've cash money in your easy reach, the temptation to spend it is too big :)

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