What Is An Envelope Savings Plan
Envelope savings is one of the best ways to guarantee you don’t go over a single dollar and stick to your budget. Depending the type of envelope savings plan you choose you literally won’t be able to spend a single dollar. Let’s dive into if you envelope savings is the best way to save for you!
What is it?
This is where you are setting a specific amount you can spend on different “categories” in your life and allocate a specific amount of cash that is kept in an envelope, hence envelope savings, and once the money has run out you will not have any budget left for that category.
Once the allocated cash in the categorized envelope has run out you no longer have any budget for that in your month or week.
Who should do it?
This is a great savings plan for someone who needs the discipline or slap on the wrist when it comes to saving. There is truly no better way to see how you spend your money than actually watching cash slowly disappear from your “grocery” envelope.
If you are someone who splurges or can’t keep their credit cards to a specific budget then an envelope savings plan is the one for you! This helps keep your budget on track and strict so you can’t go over.
Why should I do it?
If you are finding random splurges and “treat yourselves” on your credit cards throughout the month then this could be the plan for you. You are recommended to not carry or have your credit cards on you while you do the envelope savings plan. This doesn’t allow you to go over the exact amount you allocated for that week or month for yourself.
If you need a slap on the wrist then take out the cash at the beginning of the month and allocate the specific amount for groceries, gas, fun, eating out, bills, etc. and don’t take a dollar more during that savings time frame.
Does it work?
YES! It can work but you need to hold up your end of the deal. You cannot cheat and splurge on your credit card when the cash is out. If you are nervous of having an expensive month or unexpected bill than allocate $10, $50 or $100 to your “misc.” envelope and this can be a safety net if you do happen to go over on gas with another week left in the month and you’ll need gas to get to work.
Be realistic but hold yourself accountable.
Tip: “I can’t do only cash, I like my credit card points”
When doing the envelope savings method you are using cash most of the time which helps keep credit card bills down and helps you visually see when money is being spent too fast. If you can’t help your credit card swiping I suggest retiring the cards for the meantime and trying to do the envelope + cash method.