What is envelope budgeting?
Envelope budgeting is the process of storing your money in separate categories. Traditionally, a person would cash out their pay check, and put money into physical envelopes with the names of different household expenses on them—rent, groceries, utilities, etc. In a world with digital banking, you can now create these envelopes online.
If you're familiar with envelope budgeting, you may have learned about it as a child, like me. When I was in elementary school, my mom set me up with a $3 per week allowance ($4 if I did extra chores) and three envelopes: one for long term savings, one for short term savings, and one for ‘fun money’.
This taught me a lot about how putting your money into categories before you spend it helped me save more and spend on what I love. These are skills I want to pass along to you, so keep reading.Let’s dive into how you can use Simple to envelope budget from your bank account. No tools, no plugins, no shaming email alerts. Just digital envelopes: Goals.
Seriously. Goals are digital envelopes.
Yeah, if you wanted to be really literal you could cash your paycheck and stick those dollars in labeled paper envelopes. But you don’t have to. There are much more convenient and secure ways to envelope budget–with no threat of papercuts.
When your paycheck hits your account, take a half hour to sit with Simple. First, create Goals for each of your regular spending categories, like rent, bills, and groceries. Move money from your Safe-To-Spend® to these Goals until you feel like your budget is off to a good start.
Here are some basic regular-expense Goals that we know are popular with Simple customers. I’ve left the Goal amounts empty so that you can play around with amounts yourself.
Common spending categories include:* Groceries
Whenever you swipe your card, pay a bill, or send money to a friend, associate that transaction with a Goal. You’ve successfully pulled that money out of your digital envelope and spent it. Simple has done the mental math for you to square up what’s left in that Goal.
Keeping Safe-To-Spend lower than you’re used to may give you a shock at first. That’s ok; good, even. It forces you to think of your money as assigned to specific things before you spend it.
Ready for more? Start “Riding Zero.”
Yeehaw! If you get real serious about this whole envelope budgeting thing, you may enter a state we here at Simple call Riding Zero. It’s the hardcore-sounding title for the brave souls who choose to keep their Safe-To-Spend mean and lean. Every last dollar of your paycheck is accounted for with Goals, so that your Safe-To-Spend hovers around $0.
Of course, you don’t have to start by Riding Zero. Anecdotally, I’d say most people don’t. Riding Zero is for those who get a thrill out of living dangerously (except not really; nothing is going to happen to your money).
Plus, when you need to adjust your budget, you can course-correct on the go. Moving money from one Goal to another is as easy as taking out your phone and making a couple quick taps.
When your next paycheck comes, see how you did with your budget. Most people get overzealous with their budgeting the first couple times and underestimate their spending. That’s totally okay—remember, this is a process, not an endpoint. (More on why this is OK and strategies for avoiding shame-based yo-yo budgeting here.
What if it’s payday and you didn’t spend all the money you had in a Goal? You can put that extra money into a Goal for debt, or something you love. Either way, you’re taking responsibility and putting your money to work for you.
When you’re ready to start envelope budgeting or jump right into Riding Zero, try setting some of the Goals linked above.
Rather wait until payday? That makes sense. Click here to add a Google Calendar event. It contains a link to this post, and a reminder to celebrate pay day by divvying up your paycheck into digital envelopes.