Envelope budgeting
Setting aside a fixed amount per category, where what is left carries forward.
Envelope budgeting gives each spending category its own pot for the period, and you spend only what is in that pot. Its defining feature is the balance: whatever is unspent stays in the envelope and carries into the next period, and an overspend has to be covered by moving money from another envelope. The physical version used cash in paper envelopes, which is where the constraint came from.
Worked example
You put $600 in the groceries envelope for the month and spend $520. Under true envelope budgeting the next month opens at $680, not $600. Spend $640 instead and you are $40 short somewhere else — you move it from the eating-out envelope, and that envelope is $40 lighter for the rest of the month.
Common mistake
Treating any per-category spending limit as envelope budgeting. Without carryover of the unspent balance it is a limit, not an envelope — a useful thing, but a different one. Fin sets limits per category and does not carry balances forward, so each period starts fresh at the limit you set.
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