This method of budgeting is a cash only system in which you take the personal spending categories of your budget, such as groceries, shopping, entertainment, etc. and give them a limit. You then use envelopes for each category and put the appropriate amount of cash inside. Once this cash is gone, you will know you have reached your limit.
Since this budget is visual, you will always know exactly what you have available before you spend. Another pro to this budget is that it has been shown that people have a harder time parting with cash than they do when shopping with a credit/debit card. This method of budgeting may help you cut down on your impulse shopping, actually saving you money.
One of the biggest cons with this budget is that it’s harder to track where the money goes. While a credit or debit card leaves a record behind, you will have to manually track where your cash is going every time you spend. Another downside is that if something happens to the cash you have on hand, there is not guarantee you will get it back. Only carry what you need and always make sure you have a credit card available in the event of an emergency.
If you often find yourself going over on your monthly personal spending, this type of budgeting may be a good way to help get your spending on track. If you are looking for a short-term way to save some money, this may also be a great temporary method.