Envelope budgeting is an old idea whose time has come around again. The concept was originally developed in the days when a worker's weekly pay was handed out in cash. Careful families divided that cash into several envelopes, each dedicated to a specific expense, such as rent, groceries, fuel, and so on.

By using envelope budgeting, people didn't find themselves scrambling when the rent was due because they'd spent too much the previous week on groceries. They knew how much was allowed in each category, and what recurring expenses needed to be provided for. It was a very simple system, and it worked, but it needs to be adapted for today's nearly cashless society.

Software Systems for Electronic Envelope Budgeting

Today's paycheck is probably directly deposited into your bank account, and groceries are paid for with a credit card, debit card or check. You could, of course, convert your pay to cash and use it for all your expenses, but it would be far less convenient. There are also bills that must be paid by check or credit.

Online envelope budgeting is now possible using a software system. Your budget is electronically linked to your bank, credit cards, and other creditors. When your paycheck is deposited, it is divided up into virtual envelopes, just as in the old system. When you use your credit card, that expense is deducted from the appropriate envelope, using categories you've set up. This system allows you to see what you've spent in each category and how much you have left from what you've budgeted.