Definition
A budgeting method where income is divided into labeled envelopes (groceries, gas, fun) and each category can only spend what its envelope holds. The modern version uses app categories; the cash version is back in fashion as cash stuffing.
Why it matters
Envelopes make overspending structurally impossible instead of merely discouraged: when the envelope is empty, the category is done for the month. That hard stop is the thing most budgets are missing.
Example
A household puts $600 in its groceries envelope on the 1st. On the 24th, $40 remains, so the last week leans on the pantry, and the budget holds without willpower or spreadsheets.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.