The myth
The envelope system is likely one of the first budgeting methods you’ve heard about or tried yourself. Traditionally, it involves putting physical cash in envelopes that are labeled with different spending categories.
This method is meant to keep you from going over budget or making too many impulse purchases since your cash is already divided according to your needs.
However, in an age where cashless transactions are gaining dominance, bringing envelopes everywhere to cover your expenses can appear outdated and unthinkable.
The reality
Even in personal finance, trends tend to come and go. Thanks to social media, the envelope system became popular again in recent years under a new name – cash stuffing.
As the name implies, this method still involves stuffing cash into envelopes, binders, or specially designed wallets to organize and allot money for different needs.
It’s still the same system that previous generations swore by, but with a stylish twist. No matter the name, this tool is still met with the same set of criticisms and praise. Here are some common ones:
- The pros and cons of the envelope method
Some people believe budgeting with envelopes is incompatible with modern lifestyles. For them, it’s inconvenient and unsafe to carry around envelopes of cash every time you need to spend.
There are also unplanned expenses and so it can be hard to access money or track your spending if you don’t always have your envelopes with you.
Meanwhile, others follow the envelope method because it’s a tried-and-true system. You might be more mindful of your spending when you can see the cash in each envelope thinning out, pushing you to be more conscious of what you buy.
Aside from immediate needs and occasional wants, the envelope method also offers a way to set aside money for savings or long-term goals. Having a visual representation of your progress can motivate you to stick to your priorities.
- Using envelopes in the digital age
There are plenty of valid reasons to go cashless, but that doesn’t automatically make the envelope method unfit for the digital age.
At its core, the envelope method is meant to encourage mindful spending, putting needs over wants, staying within budget, and saving for the long-term.
These practices are always important regardless of your preferred ways to pay. There are also digital envelopes or budgeting apps that may allow you to tweak the method to suit your preferences.
Verdict: False.
A budgeting method doesn't have to be trendy to be useful and there are ways to apply the envelope system in the digital age. Ultimately, the best approach is the one that works for your unique needs and situation.
