Manage Your Budget with Envelopes!

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Cathy Curtis

I recently recorded a short video illustrating a tip for controlling spending weaknesses. 

Those who saw it found it very useful: a husband who showed it to his wife who insisted that their teenage daughter watch it; a S.F. fashion stylist (Kristina Moore of who wrote: “Great video! A guilt free spending solution! S-M-A-R-T;” and friends and family who asked “Cath, do you do this yourself?

Of course!  I walk the walk.

by Cathy Curtis, Certified Financial Planner

The tip is called the envelope system.  I wish I could have come up with a more original name.  There are 50 videos called “Envelope Budgeting  System” on YouTube and a google search brought up 914,000 results! But I put my own little spin on my system and it works!  Here’s how:

Own Your Spending

First off, you have to admit that you have a spending weakness.

Mine happens to be anything that adorns the body – clothes, shoes, jewelry and make-up. Yours may be dining out, tickets to concerts, sports equipment or comic books. 

Then, you figure out the amount of money you can afford to spend on your weakness. The basic formula is:  Income -  Necessary Fixed and Variable Expenses – Taxes – Savings = Discretionary Spending Money. 

Next, you answer the question “How much of this discretionary money do you want to put towards your favorite thing per month?”

The Envelope Budgeting System

•  Once you have settled on the monthly budget, go to the bank and withdraw six months worth in cash. 

•  Label six envelopes by month (May, June, July, etc.).  Then divide up the cash and place it in the envelope along with an index card. 

•  Place the envelope in your purse or wallet and each time you buy something describe it on the index card. Note the price and the date purchased.

•  When you run out of cash you can’t buy anymore until the following month.

•  If you have money left-over, either put it into savings, start an envelope for the next six months, or treat yourself to something nice.

•  Repeat each month.

At the end of six months, retrieve the index cards and study them. Evaluate whether you got as much pleasure out of the things or experiences that you anticipated. Was it worth the money?  If not, reduce the monthly budget for the next six months.

Here’s my video talking about my Envelope Budgeting System


Change Your Spending from Unconscious to Awareness of Your Spending Habits

The point of this exercise is to bring awareness to your spending which can be unconscious. It also brings a sense of control which is many times lacking with spending weaknesses. I find it very empowering. For example, if I get a notice for a sale at a favorite shop and I am out of money, I won’t go.  If a friend tells me she’s selling a fantastic line of clothing and is having a trunk show, I won’t go unless I have the cash. And the fun part is, the new month will be there before you know it!

A few things that can trip you up:

1.  The Internet: After you push “buy”- take the money out of the envelope, it is gone.

2.  You change purses and forget your envelope. You use your credit card. No problem. Take the money out of the envelope.

3.  Borrowing from the next month: not allowed under the system rules.

Try it, I think you will be surprised and happy with the result.

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Category: Your Finances

About the Author (Author Profile)

Cathy Curtis is an independent fee-only Certified Financial Planner and CA Registered Investment Advisor based in the San Francisco Bay Area. Her firm, Curtis Financial Planning (since 2001) specializes in the finances of women, their families and their businesses.

Cathy passionately believes in Financial Literacy and educates consumers through her website CurtisFinancialPlanning, her blog: Of Independent Means, and her facebook business page Women and Money. She speaks frequently about personal finance issues – most recently at the Financial Women’s Association in San Francisco, National Association of Personal Financial Advisors Norcal Group, and the Commonwealth Club.

Check out Cathy’s Author Library to learn more practical and helpful tips on Money Managment!

Comments (3)

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  1. [...] This post was mentioned on Twitter by Cathy Curtis. Cathy Curtis said: New Post in the Bay Area Women's Journal – Manage Your Budget With Envelopes: [...]

  2. Debbie says:

    Hi Cathy,

    Thanks for sharing this low tech and easy way to manage your budget! I grew up in a household where this was the exact way the budget was managed.

    My Mom and Dad started out (age 18&19) as a newly married couple with nothing! The envelope budget system helped them create significant wealth by keeping focused on their budget and financial goals!


  3. My family all the time say that I am killing my time here at net, however I know I am getting familiarity every day by reading such nice content.

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