The envelope method

In the past, budgeters relied on the “envelope method.” To perform this budgeting technique, a person would obtain a number of envelopes and write categories on each one. The categories would include things like “food,” “transportation,” “entertainment,” “utilities,” and so on. On payday, the person would withdraw cash and place a predetermined amount in each envelope. They would then use this money for each category for the entire month. This method works because it is easy to see how much money you have left as you go through the month. You can plan your spending accordingly.

Of course, with the internet and online payments, it is getting more and more difficult to rely only on cash. You can certainly use cash for some categories, but a debit card or credit card is necessary for others.

There are two options for making a budget like the envelope budget without relying only on cash. One option is to rely on store gift cards and the other is to use prepaid debit cards.

Using gift cards

Store gift cards are an option if you do all your shopping in one category in one place. You will purchase a store card with the amount of money that you need for the month. Every time you make a purchase, you can check the card balance. Once the balance is empty, you do not get to make any more purchases until the next month.

The big advantage of gift cards is that they do not come with fees. You can load them without any extra charges. The biggest disadvantage, of course, is that you can only use them at one store, or at least at one chain or brand.

Prepaid debit cards are a much more flexible option, but they often come with fees. The best prepaid debit cards will allow you to check your balance online, so you do not need to keep track of each purchase in a ledger book.

You should try to find prepaid debit cards that allow you to avoid fees. You may be able to do this by setting up a direct deposit or automatic transfer or using your card a certain number of times each month.

Preparing for the unexpected

Prepaid cards, cash, and gift cards will not help when it comes to unexpected expenses. If you have to make a major purchase that is not part of your budget, consider getting an online personal loan. These loans will keep you from having to make an extra deposit into one of your prepaid accounts. It will also keep you from having to use a credit card.