Pay yourself the first method and the envelop method is two alternative budgeting strategies. The envelop method limits a person to utilize a cash-only budget to cover for expenditures. On the other hand, the pay yourself method involves withdrawing money from a bank account before spending it. For instance, withdrawing that amount into your savings account immediately you receive your paycheque. After I receive my paycheque from work, I tend to use the pay yourself first method. Then I immediately do a transfer of about $100 into my savings account. It is a great way to save; however, it has one challenge where I transfer the amount back from my saving into a chequing account and later spent it. By repeatedly doing this, I end up saving very little. To address this problem, I intend to visit my bank and create a separate savings account with a fixed period that will force me to save more money.
The envelope method is something I have not tried yet, but I think it's a great idea, and it will help me stay within a limit of spending. Further, the envelope method targets expenses that are hard to control; for example, for me, it would be eating out, buying coffee, and shopping for unnecessary items. If I create an envelope for each of these categories and put a budgeted cash amount in each envelope for the month, this would help avoid impulsive purchases and help me save money. Putting each category in a separate envelope also helps you identify spending patterns, making it very useful to know how much money you are spending and where you are spending it.
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In conclusion, the envelope method will help discipline you, and you will avoid using your debit or credit card, which will help you be more responsible with your decisions on how you are spending your money. I do waste quite a lot of money without even knowing it because I am not keeping track of it. Using the envelope method will help me track how much money I spend on food, coffee, and shopping. With physical cash on hand, I can control the amount I finish because I can see how much money is left for the rest of the month, unlike when I use my debit card where I don't always check my bank statements and spend my money carelessly.
