Getting Out Of Debt Journey Continues With Envelope Budgeting

Getting Out Of Debt Journey Continues With Envelope Budgeting

After surrendering your financial debt burden to the Lord and developing a zero-based budget, you are ready to start living in that budget. Envelope budgeting is your ideal complementary tool to prevent more debt Budgeting.

What is envelope budgeting? Simply, for each category in your zero-based budget, place one-twelfth of the years budgeted amount in an envelope; that’s it, one envelope per category. When you need to spend, take funds from the specific envelope. When the envelope is empty, the budget is finished, and you must wait until next month to replenish that envelope and continue the process. It’s that simple.

Still, many folks have valid concerns about envelope budgeting. Let’s look at these two. First, you might be uncomfortable keeping cash in your home but want to use envelope budgeting. Second, you are unfamiliar with the treatment of amounts such as car maintenance that occurs sporadically during the year?

Using Envelope Budgeting But Not Keeping Cash At Home

If your zero-based budget for groceries was $300 monthly, and you want to use the envelope system, but wish to keep cash in the bank, what do you do? Before I answer, let me caution you. Typically, you spend less using cash than with debit or credit cards. The research is clear: you spend fewer dollars using cash, more with debit cards, and even more using credit cards.

Working with the envelope system while keeping funds in the bank is feasible but will need a bit more effort, and discipline. In the grocery’s envelope, place a note paper, and mark on one side, budget for the month, $300. Before you buy groceries, estimate how much you will need, withdraw it from the bank, and record the amount on the flip side of the paper. If you withdrew $50 from the bank, but spent $47, write this amount on the paper, and place the $3 change in the envelope.

Once withdrawals total $300 for the month, your groceries’ budget for the month is finished, unless you have unspent cash in the envelope. Assume in the month you withdrew two amounts, $50 and $250 and spent $47 from the first, and $240 from the second. The balance of unspent cash in the envelope of $13 ($3 plus $10), is the amount left to spend for that category, for that month. Repeat the process next month.

Envelope Budgeting For Sporadic Expenditures

Keep budgeted funds for these items in the bank instead of in cash in envelopes. Open a separate bank account and monthly, place one-twelfth of the yearly budget for these items. As above, place a note paper in an envelope for each of these categories, and write. The budgeted amount on one side. Before spending, consult the amount noted on the paper in the envelope, and ensure you do not exceed indicated amounts for these items such as your car license, insurance, scheduled car maintenance. Withdraw needed cash, or write a check, when you need to pay these items.


Zero-based budgeting is the tool you use to develop your estimated spending for the year. Envelope budgeting is an effective complementary tool to help you control your lifestyle choices. Ideally, place cash in category envelopes and spend cash as needed. Do not borrow from categories; when your envelope is empty, you have no budget left.

These two tools require discipline, need effort, but will help you get out of debt and live debt free. Do you want a lasting change to move from bondage to debt freedom? If yes, try these tools.

You May Also Like

About the Author: Duncan Barret