‘Money in the envelopes’ is a financial management method to better manage monthly expenses e.g. food and car fuel. The monthly budget for each budget item (or budget category) is broken into weekly budget. The allocated cash money, the budget, is then put into sealed envelopes, which would be opened only when their stated times (weeks) come.

My wife and I developed the ‘money in the envelopes’ system when we were facing financial difficulty last year, year 2009. That year (during 2008/2009 global financial crisis), my salary was temporarily reduced (all employees in my company were affected by salary reduction program) and therefore we have a very little buffer for our expenses. During that time, our monthly expenses frequently exceeded our monthly income, our reduced income that is. Therefore, we frequently dig into our saving to cover the excess. This situation did affect us morally. (I’m telling you, I don’t want to get into that situation again, ever again.) But most importantly, this situation forced us to think of better ways to manage our monthly expenses – this we will never regret.

At that time, I remember about a quote, which tells, more or less (I can’t remember exactly what it was), that a big goal, which seems impossible, could be achieved if we break it into few sub-goals or missions. It actually rang in my mind. The thinking bulb turned on. I told myself, if $400 a month is hard to manage, perhaps $100 a week is easier. And indeed it is.

So what my wife and I did was, we estimated total monthly food cost (exclude those food items which we bought once a month/few months like ketchup, sauce, milk powder and sugar that are budgeted separately in ‘MISC’) and total monthly fuel cost; and we divided each of those figures by 4 – because generally there are 4 calendar weeks in a month. And we put the money into 4 envelopes for each food and fuel. For example, $400 monthly budget for food is divided and put into 4 envelopes of $100, one envelope for each week.

Since a month normally have 5 to 6 calendar weeks, we absorbed the extra incomplete calendar weeks (having less than 7 days in a week) into the complete calendar weeks (having 7 days in a week). And we gave extra budget allocation to the weeks that have more than 7 days.

I wrote on each sealed envelope the purpose (i.e. food and fuel) and the to-and-from dates of the assigned calendar weeks and how much cash inside. My wife and I would open them only when their times come (similar to Christmas gifts – “do not open this present until Christmas”). For example:

Food
1-7-2009 to 11-7-2009
$115

Food
12-7-2009 to 18-7-2009
$95

What I like about this financial project is that it costs us nothing since we use ‘free’ blank envelopes, courtesy of mobile operator (i.e. Celcom) and banks, but we get a lot of benefits from it. (So, please do not simply throw away those envelopes from mobile operators and banks.) My wife and I do this on monthly basis, right after the pay day. The exact planning stage actually started long before that – since we planned our monthly budgets in advance.

And it works! Ever since we discovered and applied this ‘money in the envelopes’ method, we rarely run into a situation where we have financial difficulty at the month end. Our moral improved. And we were ‘happy’ despite the salary reduction. Well, at least I didn’t lose my job – this is something to thank God about.

Now the company where I am working is ‘healed’ from global financial crisis and the salary reduction program has ended – for good! And I even got a ‘handsome’ salary increment. But my wife and I continue practicing ‘money in the envelopes’ method. With this method, we are able to better manage our monthly expenses. We rarely exceed our monthly budget and hence, we could save more money and/or pay extra to monthly instalments.