Which budgeting method involves using cash in designated envelopes for different spending categories?

The budgeting method that involves using cash in designated envelopes for different spending categories is the cash envelope system. This approach helps individuals physically allocate their money for specific purposes, making it easier to manage spending and stick to a budget. By dividing cash into different envelopes labeled for categories such as groceries, entertainment, or gas, a person can visually see how much money is available in each category. Once the cash in an envelope is gone, spending in that category must stop until the next budgeting period, promoting discipline and awareness of spending habits.

This hands-on method is particularly effective for those who may struggle with overspending using cards or digital transactions, as it provides a tangible way to control finances and limit expenditures. The system encourages careful planning and prioritization, fostering better financial habits and helping individuals stay on track with their overall budgeting goals.