Does The Envelope Method Work? My Experience

About 11 months ago, I wrote about the Envelope Method, an easy way to keep track of your spending where you deposit specific amounts as per your budget into specific physical envelopes, and you only spend money off the envelopes for the intended purpose.

I had promised to try the Envelope Method then write about my experience on here, but I totally forgot. Thanks @NotMutant for reminding me about this. Well, I did try the envelope method for about 3 months, but sadly it didn’t work for me. I faced two challenges using the method:

1. The administrative aspects of the method were a bit too much work for me. For example, when going house shopping, then lunch with a friend later, I would have to “withdraw” from the two envelopes, then keep a record of the spend in each envelope, and deposit the balance back into the envelope. To be honest, that was hard to do. I ended up losing track of my cash. 
2. Most of my transactions are either by M Pesa or by card. I pay my utility bills by M Pesa, I shop and prefer to pay at restaurants by card. This meant that once I’d paid my monthly bills and house shopping, there was very little “actual cash” to deposit into the envelopes, just little cash to pay for miscellaneous expenses, which I’d ordinarily track by writing down.

However, in every failure, there are lessons to learn, and in my case, this experiment taught me a few things on how to manage my money:

• If it is too difficult, it won’t stick. Whichever method you use to manage your finances ought to be simple enough to even be thoughtless. If it is administratively hard like the Envelope Method was for me, the habit won’t stick and you end up failing.
• Before adopting a method, make sure it works for you. The Envelope Method is a great money management tool, but it fails if you rarely use cash to transact. If I had assessed my money usage pattern before taking it on, I would have realized this beforehand. It is easier to adopt a method that works with your existing habits, than to try change your habits to fit in with a new method.

In conclusion, the Envelope Method will work if your finances are largely cash based, and if you have the discipline to manage each account, and not mix up the money like I did!