One of the hardest parts about setting and sticking to a budget is staying accountable to your goals. When all your money is easily accessible with the swipe of a card, it can be easy to overspend. However, there’s one budgeting system out there that aims to make your budget feel real—figuratively and literally—so you can build healthy financial habits and achieve your financial goals. It’s called the Envelope Budget System.

What is the Envelope Budget System?

Created by Dave Ramsey, the Envelope Budget System is a way to make your budget physical, so it isn’t as easy to overspend on purchases. 

Here’s how it works.

Step 1: Create Your Budget

At the beginning of every month, write down your main budget categories. These could be things like groceries, car payments, and child care. Make sure you budget for all your spending, including “fun money.” 

Once you’ve identified your budget categories, assign an amount to each category and label one envelope with the title and the budgeted amount. 

When deciding on these amounts, it’s important to choose a realistic number but one that’s not over the top. A good place to start is to look at your past spending and assess how conservative you were in your spending. 

If you feel like you could spend less, set a budget at your previous month’s spending, and then challenge yourself to come in under budget. If you do, then that can be your new budget amount moving forward. 

Step 2: Fill Your Envelopes 

After you finish creating your budget, it’s time to fill your envelopes with cash. If you’re paid once a month, on your payday withdraw your income and fill your envelopes to their intended budget amounts. If you’re paid bi-weekly, fill them halfway from each paycheck. 

Step 3: Spend Only From Your Envelopes 

Once you’ve filled your envelopes, be sure to only spend from the categorized budget. No shuffling money between budgets or pulling out the credit card (unless it’s a true emergency, of course.) 

Note: If you have to pay bills online, it’s okay not to pull out the cash for that envelope. Just make sure to write your budget and spending from that category on your envelope so you stay accountable. 

Why Try the Envelope Budget System?

The Envelope Budget System might be a good fit for you if you often find yourself overspending or overdrafting on credit or debit cards, or if you struggle to stay on top of impulse shopping. 

It can also be a great tool for teens and young adults learning how to budget.

By physically sorting out your budget each month, you’re forced to think through your spending choices and be intentional with your habits. It can also be incredibly rewarding to physically see the leftover savings from sticking to or under-spending on your budget.  

Achieve Your Financial Goals with DEXSTA Federal Credit Union

There are countless ways to build financial security. Whether you use the Envelope Budget System, or some other budgeting option, DEXSTA Federal Credit Union can help you achieve your budget goals with great options on checkings and savings accounts with great benefits. Get in touch with one of our experienced team members to learn more about reaching your financial goals.