Despite all the budgeting apps and other high tech tools that are available for tracking spending, one of the most effective systems just requires a few envelopes and some discipline.

The system is simple; write the name of a spending category on each envelope, such as groceries, entertainment, or morning coffee. When you get paid put cash in each envelope matching the amount you’ve budgeted for that category. If you decide that you can afford to spend $300 per month on groceries, then put only $300 in your groceries envelope.

Take cash from the envelope each time you go grocery shopping and whatever cash you don’t spend put back in the envelope. Write the amount you spend on the envelope and keep a running tally of how much cash remains.

Once all the cash is gone from an envelope, you have used up your budget for that category. Some folks insist that you stick with your budget and cease spending on a given category when the envelope is empty, while another school of thought is that you can borrow from other categories to supplement a deficit.  If you have used up all your allotted funds for groceries, but you still have money set aside for entertainment, it makes sense to pull from the latter, which is frivolous, for the former, which is pretty important since you need to eat.

In the event that there is cash left in an envelope at the end of the month you can decide to leave it there and increase the budget for that category slightly for the next month, distribute it to higher priority items, or, best of all, put into savings and keep for your future needs and goals.

If you find that there is never enough cash in certain categories or too much in others, you can adjust your budget from month to month and refine you spending priorities.