Envelope Budget
How to set up and use the Envelope budget method in Forbidden Finance, a digital version of the classic cash envelope system.
Overview
The Envelope budget is a digital version of the classic cash envelope system. You create envelopes for different spending categories and put a fixed dollar amount in each one. When you spend money, it comes out of the matching envelope. When an envelope is empty, you stop spending in that category -- or you consciously decide to move money from another envelope. This method is available on Starter tier and above.
Unlike Zero-Based budgeting, your envelopes do not need to add up to 100% of your income. You fund the categories you want to control, and the rest of your income stays unallocated. This makes it a great fit for people who want strict limits on specific spending areas without budgeting every dollar.
How to Set Up an Envelope Budget
Open the Budget Wizard
Navigate to Budget and tap Create Budget. Select Envelope from the method list.
Enter your monthly income
Enter your total monthly take-home pay.
Create your envelopes
Name each envelope after a spending category you want to control. Common envelopes include Groceries, Dining Out, Entertainment, Clothing, and Personal Care.
Set amounts for each envelope
Assign a fixed dollar amount to each envelope. This is the hard cap for that category this month.
Choose your overspend behavior
For each envelope, decide what happens if you exceed the limit:
- Deduct from next month: The overspent amount reduces next month's allocation for that envelope.
- Ignore: The overspend is noted but does not affect future months.
Activate your budget
Review your envelopes and tap Activate.
Reading Your Progress
Each envelope shows:
| Metric | What It Means |
|---|---|
| Funded | The amount you put in this envelope |
| Spent | How much has been spent from this envelope |
| Remaining | Funded minus Spent |
| Percentage used | Visual progress bar showing how full or empty the envelope is |
Envelopes also display status flags:
- Healthy: Plenty of funds remaining
- Low: Less than 20% remaining
- Empty: All funds spent
- Overspent: Spending exceeds the funded amount
Example Setup
Monthly income: $4,000. You create envelopes for your variable spending categories:
| Envelope | Amount | Overspend Rule |
|---|---|---|
| Groceries | $500 | Deduct from next month |
| Dining Out | $200 | Deduct from next month |
| Entertainment | $150 | Ignore |
| Clothing | $100 | Ignore |
| Personal Care | $75 | Ignore |
| Total enveloped | $1,025 |
The remaining $2,975 covers your fixed expenses (rent, utilities, insurance, loan payments) and savings. You do not need to create envelopes for those since the amounts are predictable.
Midway through the month, your Groceries envelope shows $280 remaining out of $500 (44% left), and your Dining Out envelope shows $30 remaining out of $200 (15% left -- flagged as Low). You know to cook at home more and skip restaurants for the next two weeks.
Overspend Behavior
The two overspend options give you different levels of discipline:
Deduct from next month is the strict approach. If you overspend your $200 Dining Out envelope by $40, next month's Dining Out envelope starts at $160 instead of $200. This enforces a real consequence.
Ignore is the flexible approach. The overspend is recorded for your awareness, but next month starts fresh with the full amount. Use this for categories where occasional overages are acceptable.
Tips
Frequently Asked Questions
Do my envelopes need to add up to my full income?
No. Unlike Zero-Based budgeting, you only envelope the categories you want to control. The rest of your income is unallocated.
Can I move money between envelopes mid-month?
Yes. Use inter-category transfer to move funds from one envelope to another. This is the digital equivalent of pulling cash from one physical envelope and putting it in another.
What happens to leftover money in an envelope at month end?
If rollover is enabled, unused funds carry forward to the next month. If rollover is disabled, envelopes reset to their configured amount.
How is this different from Zero-Based budgeting?
Zero-Based requires you to allocate every dollar (unassigned must equal zero). Envelope lets you fund only the categories you choose, with no requirement to account for your entire income. Envelopes also have explicit empty/overspent states that Zero-Based does not use.
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