The envelope system of budgeting has been around for a long time.  I know people who mention that their grandparents used this method.  It's stuck around all this time because it is a good, solid way to budget for the things we spend our money on everyday. 

There are many ways to implement the envelope system.  The original method is cash basis only.  Money is allocated to actual paper envelopes.  Once the cash is gone from that category then that is it.  No more spending for that category.  In today's world there are many that don't use cash much anymore.  I am one of them.  I really like to use my credit card.  I really like getting the points my credit card company gives me.  Since I use my credit card instead of cash then I couldn't use the original version of the envelope system.  Fortunatly there are lots of software programs available that allow you to use virtual envelopes.  I use one of them in my planning my personal finances.  In case you haven't guessed...I use IntelliPenny.

IntelliPenny allows me to set up virtual envelopes and it allows me to use my credit card to make my purchases.  I have found the envelope system to be very easy to implement and easy to maintain.  The amounts that go into each envelope can be tweaked to match my needs at that time.  If I find that I am accumulating an excess in one envelope then I can transfer money from it into a different envelope.  I've had to do this in the past.  For example, I have an envelope that holds money for eating out.  If I don't go out to eat as much as anticipated then I'll move some of that money to my groceries account.

The envelope method helps keep me in check.  I don't like to see my envelopes emtpy, so every time I spend I think about it.  No more mindless spending.  Do I really need this new shirt? What about this new cereal...will I really eat it?

The envelope system won't solve all your financial woes.  It takes some amount of discipline to work with a budget.  It also takes a few months to get your budget tweaked the way you want it.  But if you are willing to make a change, give it a try and see how it can work for you.