The Envelope Method requires you to move to a cash-only system. Al-though this may sound like a challenge, it’s really easier than you think! This technique is an incredibly simple three step process.
Step 1 – Divide and conquer. Each payday, cash your paycheck at your bank, then divide the cash into different envelopes for each expense cate-gory.
For example, label one envelope Rent or Mortgage, one envelope Groceries, one envelope Car Payment, and continue in that manner until you have an envelope for every expense. Include an envelope for daily spending money for things like lunch or parking.
To determine how much to put into each envelope, look at your monthly budget and then divide the monthly expense by 2 if you get paid twice each month or 4 if you get paid every week. So if you get paid every week and your grocery bill is $400/month, take $100 out of each paycheck and put it into the Groceries envelope.
Step 2 – Use cash for your expenses. Once your paycheck is divided up, it’s very easy to keep track of your spending. That Groceries envelope, for example, is your grocery money for the week. Spend it wisely. Once you spend the money in that envelope, that’s it for that week.
Step 3 – Effortlessly limit daily spending. Each day, put the cash from that day’s Spending Money envelope into your pocket or purse. That’s your spending money for the day. When it’s gone, stop spending!
Making a separate envelope for each day’s spending money helps you stay within your budget without having to keep a mental figure of your balance in your mind at all times.
Besides making it easy to limit your spending to the budgeted amount, the Envelope Method also gives you a better sense of your moneyWhen you pay cash, you’re more likely to see the real impact of your spending, even if it’s small expenses.
As you will soon see these really small expenses seriously add up and even just using the envelope method for a few months can be very effective for helping you save money for your survivalist expenses.