Dave Ramsey made the budget envelope system popular again. He highly recommends using the envelope system to get out of debt. So what exactly is the envelope system? The envelope system is when you set aside cash for each category of your budget, and this cash is kept in envelopes. It allows you to keep up with how much money you have left in each category by the cash that remains in the envelope.
I love the idea of a budget envelope system but I am not a fan of carrying large amounts of cash around. So I came up with a modified envelope system that we use to keep track of the budgeted amount for each of our expense categories.
Modified Budget Envelope System
The modified budget envelope system works basically the same way except we don’t actually put cash in the envelope. Once we set our budget for the month I write the name of each budget category on the outside on an envelope and the amount budgeted for that category.
For our food category, I will write food on the outside of the envelope and the amount that is budgeted for food that month. There are different ways to set up a budget envelope system. Some people do it based on how they get paid. Such as monthly, biweekly, semi-monthly or every week. Set it up the way that works best for you.
Every time you buy something in that category put the receipt in the envelope and write the expense down on your envelope expense tracker. You can download a FREE copy of my Envelope Expense Tracker that I use below.
Envelope Expense Tracker
I print copies of my envelope expense tracker and keep one in each envelope. I log every dollar I spend for that category. This keeps me organized and I can see at a glance how much of my budgeted allowance I have used for each category.