What’s so special about envelope budgeting system?
The envelope approach to money management has many advantages. First, it requires spending only from cash on hand.
Second, this approach includes setting money aside each month to meet periodic spending requirements. Now, when you take a family vacation, or purchase holiday gifts, the money is already available.
Third, always spending from a remaining envelope balance, means you always know how much you can spend without impacting other areas of your plan. When the money in an envelope is gone, you have two choices: (1) Transfer cash from another envelope and spend less in that area, or (2) Wait to spend until you allocate more money to that envelope in the next month or pay period. These three advantages form clear distinctions between this method of money management, and every other approach. Following this paradigm completely eliminates the creation of consumer debt and allows you to begin saving and investing at levels you likely never thought possible. What’s more, if you’re already working on debt elimination, envelope budgeting enables a systematic approach that will help accelerate its payoff.
With this approach you actually allocate cash you have on hand to spending accounts that are set up for a specific purpose, and then spend from the balance in those accounts. It’s a proactive approach to your finances that completely takes out the guesswork of money management.
5 positive results from using the envelope budgeting
We have seen great benefits from applying the envelope approach to monthly budgeting. We’ve heard from so many of our Mvelopes users and their stories are really overwhelming. What you may not expect is that the benefits are not only financial, but also emotional and relational. Here is what we regularly see our Mvelopes users experience:
1. Living within your income limits for the first time ever. Many people overspend not because they don’t have enough income, but because they don’t know or “can’t see” where the money is going every month. By proactively using the envelopes system our users are finally able to see where every dollar is going and they can proactively pre-fund each of their monthly categories before spending the money. This gives them the freedom to live within their current income and helps them to not spend money they don’t already have.
2. Reduction in spending waste. Because of the visibility that the envelopes system gives, you can easily find areas where you are “wasting” money. You may be thinking that you only spend $50 a month on eating out, but once you take a look at your actual spending, you can now see that you are spending $150. That’s the beauty of following the envelope system. Many of our Mvelopes users recover up to 10% of their income just by simply finding and eliminating the spending waste.
3. Emergency savings fund. We are privileged to see people break their cycles of debt by creating financial margin in their monthly budget through savings. People who were living from paycheck-to-paycheck are learning to “pay themselves first” and many are able to pay cash for an emergency – like a broken car or a broken appliance. We see families become able to take a vacation for the first time in many years, with the cash that they’ve been able to set aside. Saving becomes just another envelope that needs to be pre-funded every month and once you make it a part of your regular monthly cycle it becomes much easier to start and stick with saving money.
4. Cash for periodic expenses. The area of periodic expenses (Christmas, vacation, car insurance, etc.) is where many are simply unprepared and hence use credit cards, payday loans, and other forms of debt to cover these items. By using Mvelopes, our users are finally able to set aside cash every month for their periodic expenses and avoid debt when time comes to make the purchase. Every periodic expense is treated just like a regular monthly need, with one key difference. The money accumulates in your periodic expense envelope until you need to make the payment.
5. Mvelopes saved my marriage. Yes, that’s what we hear from our faithful users. Since money issues cause marital tensions and contribute to a high divorce rate in our nation, couples who are finally able to communicate about money see their relationship heal and flourish. Mvelopes gives every couple one tool, one simple system of not only managing day to day expenses but also planning and dreaming for the future.
We could keep going but I think you can see that there is really no reason why anyone should say no to following this old, tried and proven envelope approach to budgeting. Mvelopes simply makes it feasible for today’s cashless lifestyle by using today’s technology!