Modernize the envelope budgeting system with Citizens Savings Tracker®¹

By Citizens Staff

Budgeting can help you reach your financial goals, whether you're paying down debt, saving for retirement or trying to afford a major expense like a house, car or vacation. Choosing a budgeting system can be stressful because of the various approaches and styles of budgeting. For instance, there are popular trends on social media like “loud budgeting,” where you tout your money saving habits, or “soft savings,” where you quietly budget for more immediate wants. Regardless of how loud or quiet you are about your budget, the "right" budget is the one that you use consistently and works for you.

For people who want to get a stronger grasp on their money and are willing to put time and energy into understanding their various expenses, the envelope budget system can be useful. It's one of the more popular strategies that has stood the test of time, although it’s evolved. Traditionally, people would divide their monthly income and literally stuff cash into various envelopes labeled with specific goals in mind, like a future car or vacation fund. Today, there are digital and mobile tools to make the process easier and less hands-on, like the Citizens Savings Tracker®. As a time-saving aid to the envelope method, it helps customers set aside money for long-term goals and expenses on their mobile device, saving them a trip to the bank to get cash. It’s also a convenient way to set defined amounts of cash for different categories, and practice discipline by knowing where their money is going at any time.

Chris Powell, Executive Vice President and Head of Consumer Checking and Deposits at Citizens, backs the benefit of using Citizens Savings Tracker® when it comes to budgeting. He said, “By harnessing the power of technology, we aim to simplify the savings process, promote financial literacy, and help our customers achieve their aspirations."

What is the envelope budget system?

Envelope budgeting is a savings approach that allows you to be intentional about organizing your expenses, and eliminates the temptation of impulse buying or spending your money on something other than a preplanned priority. Also known as the "envelope budget" or the “bucket budget,” this system involves dividing your budget into categories and assigning an envelope to each.

Is the envelope budgeting system right for you?

This system is best for people who want to visualize how their dollars are being spent, and are willing to put time and energy into managing their envelopes. People who struggle with impulse spending or have a hard time sticking to spending limits may benefit most from this system.

Advantages of using the envelope budgeting system include giving you a visual of how much money you have, which can help you practice spending self-discipline. Controlling impulse buys helps you become intentional about how you grow savings and pay down debt.

Possible disadvantages of using the envelope system is that it can be time-intensive and, if you’re only using cash, it can require a lot of effort and be difficult to track your transactions. With the Citizens Savings Tracker®, the mobile experience makes it easier and less time consuming to track your transactions since they’re digital. Think of the product as a turn-key way to automate your savings.

If it’s right for you, here’s a breakdown of how to carry out the envelope budgeting method:

1. Determine your usual take-home pay

In figuring out your take-home pay, look at the net pay on your paystub. This is your total (or gross) income, minus taxes. This amount can range from weekly to biweekly (every other week) to semi-monthly (every 15 days or so), and it may or may not be the same amount every time. Understanding your usual or average take-home pay, minus costs for your essentials, allows you to determine how much you are able to put into each bucket, category or envelope, when you are paid.

2. List all your expenses and create spending and savings categories

By identifying each necessary expense and putting it into a category, as well as having categories for discretionary spending (on wants, not needs) and savings goals, you can determine how to break down your take-home pay. This way, your expenses are covered and may even be more likely to be paid on time, and you're still reserving a place for money spent on enjoyment and your future.

3. Split out your monthly income to fill each category

In some instances, you may need to fully fund a category with your take-home pay in the earlier part of the month, or you may be able to split your expenses in half and fund portions at a time. By categorizing your expenses, you may realize which parts of those categories are necessary living expenses, and which are "wants" that you could trim down or eliminate altogether.

If you assess your buckets and come up short, you can go back to categories to decide. For example, whether you need to subscribe to several streaming services, or if you could just keep the one you watch most. Or maybe you don’t need a streaming service at all. On the flip side, if you end up with extra money after the buckets are filled, you could put it toward whatever you find most worthwhile that month. That could include paying down debt, a night out for dinner or saving it for a house.

4. Use only what's in the envelope

It can be tempting to overspend on the categories you've established for discretionary spending and take from other categories like long-term savings or investments. However, it's important to only use what's in the bucket for the month so you’re sticking to the savings plan you've set for yourself.

5. Supplement your savings strategy with digital tools

While the original envelope system involves manually stuffing cash into envelopes, you can now budget digitally and automatically. Citizens Savings Tracker® can help set your financial goals, whether you’re saving for a down payment, want to pay off your debts or starting an emergency fund. This product was launched last year and is available on the Citizens app. Since then, Citizens customers have set more than 11,000 savings goals and saved an average of $450-600 toward goals per month. According to Citizens, a customer can grow their balances by roughly 21% every month, once they’ve adopted the product.* Citizens Savings Tracker® can help you, too, by budgeting money in your checking and savings account with automatic transfers, rounding up your debit card transactions and more.

Each time you log into the app, you can check on the progress of your savings goals. You can also set up multiple goals and determine what percent of your savings is allocated to each one. Additionally, you have several options when it comes to managing your budget. You can:

• Pause your automatic savings.
• Delete or create new goals.
• Change how you automate your savings.
• Set transfer limits.
• Move money between goals.

Learning to save and budget in a practical way

The envelope budgeting system is one of several financial management strategies that people can choose from when organizing their income and expenses in a practical way. While the original envelope budget system may be an old-fashioned idea that suggests you have to physically handle your money, give it a modern twist with the Citizens Savings Tracker® — a great time-saving and convenient tool that can curb overspending and help build savings.

Ready to tackle your financial goals? Wherever you are in your financial journey, Citizens is here to help – with banking that stands with you and grows with you. Learn how to open a savings account with Citizens and learn how the Citizens Savings Tracker® can supplement your financial strategies, so you can achieve your dreams.

Learn more about Citizens Savings Tracker®