Envelope Method
BudgetingGlossary term
Definition
A cash-based budgeting system where you place allocated amounts of cash into labeled envelopes for each spending category. When an envelope is empty, spending in that category stops. Modern versions use digital apps to simulate the same concept.
Related terms
- Zero-Based BudgetA budgeting method where every dollar of income is assigned a specific purpose, so income minus expenses equals zero. This approach forces intentional decisions about every category of spending and saving, eliminating untracked money.
- BudgetA financial plan that outlines expected income and expenses over a specific period. Creating and following a budget is essential for managing money and achieving financial goals.
- Discretionary SpendingNon-essential expenses you choose to make, such as dining out, entertainment, subscriptions, and hobbies. This is the most flexible part of a budget and usually the first area to cut when trying to save more or reduce expenses.
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