Is the Envelope System the Best Budgeting Method?

Is the Envelope System the Best Budgeting Method?

Saving is an essential part of life and finances. We need to save to ensure that we are able to fall back on something when unexpected bills hit or even to make sure we are able to afford all of the things we need. There are plenty of methods out there which can help us save, but which one works for you and which will adapt best to your lifestyle? Here at LoanPigUSA, we believe that it is all a process of trial and error. There is no way of understanding which method will personally work for us without testing multiple techniques out! So is the envelope system the best budgeting method?

How does envelope system method work?

Understanding how the method works and what to do is really just as simple as it sounds! To complete it, all you need is an income, a few envelopes and an understanding of your current finances.

1. Determine Your Income
Before you begin any method of saving you need to determine how much money you have after you have paid all of your necessary outgoings, for example, bills. This way you have a clear understanding of your finances.

2. Budget
After you have worked out your income after your bills, you will have an idea of how much money you can save. But, before you put it all away, you need to figure out how much you spend on each individual thing. For example, how much you spend on food monthly and how much you spend on travel etc. After this, you are able to split everything into envelopes with certain amounts on. You should have one envelope named ‘food’ one named ‘travel’ and so on.

3. Fill The Envelopes
So, once you have named your envelopes, you need to make sure you put in the desired amount of money each month which you want too. This way you will know where all your money goes and will be able to keep on track of your finances.


  1. You are in control – When using the envelope method, everything is very visual. This means you can physically see your money going into the envelopes and also see the money going out of them.
  2. It is an eye-opener to your spending – Similarly to above, you can visually see your money, meaning you are gaining a better understanding. This method might make you realize that you are unnecessarily spending and you don’t need to be. Helping you save even more money in the long run.
  3. It builds discipline – Working with a budget will build discipline, it will limit your spending which could potentially impact your finances massively.


  1. Time-consuming – The process isn’t an easy one which you can master in a few days. You need to have the time and the patience to be able to spend months on perfecting your budget.
  2. You have to physically get the cash – The process involves you going to an ATM to withdraw money each month. With the whole method being based around cash, it might cause an inconvenience.
  3. You won’t get credit card rewards – With everything being in cash, there are no credit cards involved. Meaning you won’t earn any more money after time has passed.

Conclusion of the Envelope System Method:

Please note that not every method will work for everybody. This means that although the envelope system method is useful, it might not be the best one for you. There are plenty of other methods out there which you can find all over the internet to help you save as much money as possible.