The envelope system, also known as the envelope method, is a popular method for visualizing and maintaining a budget. The key idea is to store the cash 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, he or she will put the amount for that bill in cash on 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.
- "The Envelope Method".
- Ramsey, Dave (2003). The Total Money Makeover: A Proven Plan for Financial Fitness. Nashville, Tennessee: Thomas Nelson, Inc. p. 5. 0-7852-6326-8.