GLOSSARY · BUDGETING, SPENDING & SAVING
Envelope budgeting
Setting aside a fixed amount for a spending category at the start of each period, in cash envelopes, separate accounts or app categories, and stopping spending in that category when its amount runs out. It turns a limit into something visible and works by using mental accounting on purpose: money labeled for one use stops feeling available for another.
Also called: cash envelope system, envelope system, digital envelopes, cash envelopes, category buckets
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · BUDGETING METHODS & FUNDAMENTALS · FOUNDATIONSEnvelope Budgeting With Cash or AppsCHAPTER · BUDGETING METHODS & FUNDAMENTALS · FOUNDATIONSChoosing a Budgeting Method That FitsRELATED TERMS
SOURCES
- Mental Budgeting and Consumer Decisions. Heath & Soll, Journal of Consumer Research, 1996.
- Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay. Prelec & Simester, Marketing Letters, 2001.
- Mental Accounting and Consumer Choice. Richard Thaler, Marketing Science, 1985.