What is the envelope system?

The Envelope System is a budgeting method where you allocate cash for specific spending categories into labeled envelopes. Here's how it works:

1. Set Categories: Identify your major expense categories, such as groceries, dining out, transportation, and entertainment.
2. Allocate Funds: Determine how much money you plan to spend in each category for the month and put that amount of cash into the corresponding envelope.
3. Spend from the Envelopes: Use the cash in each envelope for its designated purpose. When the envelope is empty, you've reached your limit for that category.
4. Adjust as Needed: At the end of the month, assess how well the system worked and adjust your allocations if necessary.

This system helps enforce spending limits and provides a visual, tangible way to manage your money. It can also reduce reliance on credit or debit cards, making it easier to avoid overspending.