How to Use Envelope Budgeting to Increase Your Savings

1. Create Categories and a Budget

Create clear categories so that you know exactly where your money is going and how much is being spent.

2. Label the Envelopes

After deciding which categories to include in your spending budget, you’ll next write the names of the category and the budget amount on each envelope.

3. Allocate Funds to Each Envelope

Place the allocated funds according to your established budget into each envelope.

4. Spend Wisely

When it’s time to go grocery shopping or pay your bills, take funds from the appropriate category or simply carry the envelope with you on the trip. 

Even if you already have a healthy emergency fund, a budget tracker or worksheet will allow you to track how much money you’re earning, investing, and spending each month. Unlike the envelope method, you aren’t restricted to only spending with cash, which allows much more flexibility. Though manually tracking your expenses can take up some time, it’ll also force you to think about potential ways to cut down on your spending and improve your money habits.