Envelope Budgeting
Name
Institution

Envelope Budgeting
Envelope budgeting is a relatively simple way of organizing one’s money and spending it wisely. The first process of envelope budgeting system is developing a budget, depending on one’s income. It involves dividing the paycheck into categories, depending on their expenses. For example, rent, groceries, car payment, school fees, savings, and leisure. An individual should then assign each category to a single envelope. Utilizing a marker, one should write each category on an envelope, after which he or she places the money into these envelopes, depending on the budget he or she had previously made. It is vital to note that an individual must put in the envelope the exact amount he or she had previously budgeted for in each category. A person can then spend money from each envelope, depending on what he or she needs at the moment (Paris, 2004).
Expenses that only need to be paid once in a while, such as rent and school fees, may not need envelopes, or an individual can write a check and place it inside the envelope. Once the money for a certain category is through, one should quit spending on that item altogether. A person should wait until the next paycheck to add money into this envelope. However, if it is a necessity like food, one can skim some money from less necessary categories such as leisure.
The main benefit from envelope budgeting is that an individual clearly knows how much he or she has left to spend on a specific item until the next paycheck. This helps an individual to avoid extravagance on unnecessary expenses. It is also beneficial in saving more money since leftover funds in various categories go straight to one’s saving envelope. The main drawback of envelope budgeting is that as a person survives on one paycheck to another; if funds in a vital category end before payday, there is no means of adding funds into this envelope (Roth, 2010).
References
Paris, J. L. (2004). Money management for those who don’t have any. Eugene, Or: Harvest
House Publishers.
Roth, J. D. (2010). Your money: The missing manual. Sebastopol, CA: O’Reilly Media.