How to Use the Envelope System
The fundamentals of budgeting are simple – know where your money is going so it serves you, not the other way around. When you have your finances in order, you are better able to be used by God to accomplish great things for the Kingdom, and keeping a budget is the best way to do that.
The envelope system is perhaps the most simple, tested-and-true way to track your spending because it doesn’t require anything more than a few envelopes. Crown’s Founder, Larry Burkett, pioneered the envelope system years ago and it still works just as effectively because it helps you literally see where your money is going.
Since there are so many options for digital methods of payment now, relying on cash alone for purchases will help you save. But if you take it one step further and divide this cash into specific, intentional categories, then you’re well on your way to reaching your goals and living in freedom.
The first step is to build your budget.
You’ll need to:
- Determine your monthly income
- Track your monthly expenses
- Compare your income to your expenses
- Build budget categories to organize your monthly expenses – you can fill in all your budgeting information and get help defining categories here
- Cash out your envelopes
Whenever you receive your paycheck, go to the bank and withdraw cash. You don’t have to pay cash for your fixed expenses, like your mortgage, rent, or insurance. Instead, we suggest that you cash out all variable categories that will involve you making purchases – shopping, groceries, eating out, getting coffee or treats, buying gifts, any entertainment or recreation, etc.
Designate an envelope for each of these categories and write the name of the category, along with the allocated amount, on it.
Carry these envelopes with you wherever you go. Whenever you go to make a purchase, take the exact amount out of the appropriate category to pay. Once you run out of cash in one envelope, you can’t spend anymore.
There are several apps that function like the envelope system on your phone. You can connect your bank account and it allows you to assign each purchase to a digital category. While this system works great, we still encourage you to use cash for a large part of your budget, especially in the areas you overspend. Credit or debit cards don’t connect your emotions to your purchases the same way that cash does, so using them will always make it easier for you to overspend.
If you want an easy-to-follow guide for your finances, download the free Money Map. You’ll already be off to a great start with your budget and envelope system!
Try setting up some accountability to keep you on the right track, and let us know how you’re doing!