The envelope method: Extreme control for compulsive spenders
💡 Quick Tip
Take absolute control of your variable expenses with the classic cash envelope system. Learn how the psychological friction of paying with physical money helps stop impulsive purchases and keeps you strictly on budget.
What is the envelope method?
The envelope system is a physical budgeting technique. You put the cash allocated for each variable expense category into different paper envelopes. When the envelope is empty, you stop spending in that category until next month.
The problem with invisible money
Paying with cards or Apple Pay makes money feel invisible. There is no psychological pain when spending. The envelope method brings back "friction": seeing physical bills disappear makes you value each purchase much more.
How to apply it step by step
- Identify risk categories: Use envelopes for areas where you overspend: Groceries, Leisure, Restaurants, and Clothes.
- Assign a budget: Decide your monthly limit per category.
- Withdraw cash: On payday, withdraw the exact cash and distribute it into labeled envelopes.
- Absolute discipline: Bring only the "Groceries" envelope to the supermarket. No cheating by taking money from the "Leisure" envelope.
End of the month
If you have leftover cash, celebrate! Put it directly into savings or debt repayment.
📊 Practical Example
Practical example with real numbers
You decide to use the method for three tricky categories. You withdraw €500 in cash and make three envelopes:
- Groceries Envelope: €300
- Leisure/Dining Envelope: €150
- Clothes/Treats Envelope: €50
In the third week, friends invite you to dinner. You check your "Leisure" envelope and see only €15 left.
Instead of paying by card and ruining your budget, you tell your friends you can't do a pricey dinner but will join them for coffee later. Thanks to the physical limitation, you avoided spending €40 you didn't have and protected your monthly budget.
