Does The Envelope Method Really Work?

Many people struggle with budgeting.

And I have to agree– budgeting isn’t easy. First of all, it takes some time to properly allocate your money. How much is going to your food expenses? How about your transportation costs? You have to factor in all that before you can create a wise budget. On top of that, budgeting is actually just planning, so you need to be disciplined enough to actually follow through with that plan.

If you’re struggling with your budgeting, then great, you’re on the right post. Here’s one method that might work for you: the envelope method.

What is the envelope method?

The envelope method consists of taking literal envelopes and using them to allocate your money for different things.

For example, if you’re a college student, you can have an envelope for school supplies, an envelope for transportation, an envelope for groceries, an envelope for savings (yes, because you should really consider savings as an expense!) and an envelope for fun times.

Most people suggest using paper envelopes, while others suggest using plastic ones. When I was doing the envelope method, I personally used different colored Hallmark envelopes, since they’re thicker than your average envelope and much prettier too! You can use a felt tip pen to mark your categories so that you won’t forget. Another way to differentiate them is to use different colored envelopes AND mark them with a felt-tip pen like I did.

How the envelope method works

The psychology behind the envelope method is rather simple. By physically separating your money allocation for each expense category, you’re giving yourself a concrete limit as to the amount of money that you can spend.

Basically, all this means is that once the money inside a specific envelope runs out, then your budget for that expense category is already spent. That means you can no longer spend on that category once your budget runs out. Best of all, the physical nature of this method makes you have no other choice. Nice, huh?

Does the envelope method actually work?

In some cases, yes, it does. But like all methods out there, be it for personal finance or not, its effectivity still largely depends on the individual doing it. You can do a half dozen envelopes every month, but if you always cheat on yourself while using them, then it’s not going to work. Remember, discipline is key!

Other alternatives to the envelope method

Like I said, I used to do the envelope method myself, but I eventually stopped because I found it too much of a hassle to keep track of everything manually. In my opinion, that’s the biggest (and perhaps only) drawback to doing the envelope method: everything is manual.

Ironically, its biggest advantage is also its biggest disadvantage.

If you’re looking for alternatives,  you can also check out desktop or mobile applications that can do your budget tracking for you. There are plenty of apps that can replace the envelope method, or at least supplement it.

Currently, my favorite budgeting app on the iOS is Pocket Mobile. The pro version is only around $5, which is worth it for the amount of work it can do. If you don’t want to spend any money, you can also just use the free version, which is actually already good in my opinion. (Note: this isn’t affiliate marketing and that’s not an affiliate link for Pocket. I’ve been using it for about 4 years now and I absolutely love it!)

For Android, my favorite budgeting app is Money. It’s not as aesthetically pleasing (personal preference, haha!) as Pocket nor is it as smooth, but it’s much better than the other budgeting apps I’ve seen on the Playstore.

Final Thoughts

So, is it possible to budget successfully with the envelope method?

Short answer? Yes, it is.

Long answer? It depends on a lot of factors, the biggest of which is discipline. Again, if you’re not disciplined, then no budgeting method in the world can help you control your spending and further your savings.

If you’re keen on trying out the envelope method, I suggest downloading an app of your choice too, to help with the automation. The envelopes will act as a physical limit to your spending while the app will help you keep track of every single penny that you’re keeping inside those envelopes.

Remember, a penny saved is a penny earned!

Have you tried out the envelope method? What about other budgeting strategies? I’d love to know your experiences below!