The cash envelope method. What is it?

The cash envelope method.  What is it?

The cash method is a great way in setting up a budget and getting out of debt.  It’s also a great way in continuing to stay on a budget to ensure your expenses are controlled.  Here’s how it works.  Let’s say you (and/or your partner/spouse) bring in after taxes $3000.00 a month.  You get a few envelopes and write down a category on each of them.  For example, you have the following expenses:

  1. Rent/Mortgage
  2. Utilities
  3. Cable/Satellite TV
  4. Insurance
  5. Car Payment
  6. Cell Phone
  7. Food
  8. Fuel/Gas
  9. Savings
  10. Misc.

You gather 10 envelopes and write one of the above-mentioned categories on an envelope.  You then gather your last month’s bills for the categories listed 1 – 8.  And place said money (or a check) in within each of the appropriately marked envelopes.    Let’s say you have $250.00 left over.  Then, you would take $200.00 and place it in the Misc. envelope (CASH), and $50.00 into savings.  Anything that is not listed in one of the first eight categories must come out of envelope labeled Misc.  Once you run out of money in the Misc., you cannot spend any further amount of money.  It’s kind of a forced budget management tool.  It works well for those who can be disciplined enough to follow through with it.

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