The envelope system, also known as the envelope method, is a popular method for visualizing and maintaining a budget. The key idea is to store the cash to meet separate categories of household expenses in physically separate envelopes.

As currently used today, the envelope system is believed to have originated during the Great Depression

Great Depression

The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

 of the 1930s

1930s

File:1930s decade montage.png|From left, clockwise: Dorothea Lange's photo of the homeless Florence Thompson show the effects of the Great Depression; Due to the economic collapse, the farms become dry and the Dust Bowl spreads through America; The Battle of Wuhan during the Second Sino-Japanese...

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Usage

Typically, the person will write the name and average cost per month of a bill on the front of an envelope. Then, either once a month or when the person gets paid, he or she will put the amount for that bill in cash on the envelope. When the bill is due, the money is taken out to pay for that bill.

This prevents the person from spending the money out of their pocket or bank account, because it is already allocated to the bill.

This is a budgeting mechanism often suggested to people by Dave Ramsey

Dave Ramsey

David L. Ramsey III is an American financial author, radio host, television personality, and motivational speaker.Ramsey's syndicated radio program The Dave Ramsey Show is promoted with a tagline that "It's about your life and your money," and it is heard on over 450 radio stations throughout the...

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See also

• Personal budget
  Personal budget
  A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget...
  
  
• Zero-based budgeting
• Participatory budgeting
  Participatory budgeting
  Participatory budgeting is a process of democratic deliberation and decision-making, and a type of participatory democracy, in which ordinary people decide how to allocate part of a municipal or public budget...
  
  
• Programme budgeting
  Programme budgeting
  Programme budgeting is the budgeting system that, contrary to conventional budgeting, describes and gives the detailed costs of every activity or programme that is to be carried out in a budget....