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Note personal finance pundit Dave Ramsey champions the envelope system of personal budgeting. What is the envelope system? It’s a low-tech personal budgeting method inspired by Dave Ramsey’s grandmother, who used it before the time of fancy, flashy online budget planning software such as Mint and Thrive and Quicken.

Dave Ramsey’s envelope system works likes this:

1. Begin your personal budgeting by withdrawing a bunch of cash.

2. Get some envelopes and write down spending categories on them, such as gas, clothing, food and entertainment.

3. Put as much money that your personal budgeting plan allows you to spend in the envelope.

4. Whenever you spend from a certain category, take it from its respective envelope.

5. Once the money in the envelope is gone, don’t spend any more in that category until you receive your next paycheck.

6. Avoid using credit and debit cards.

7. Stick to the system for two months to see if you like it.

Obviously, the envelope system has its limitations as a personal budgeting system. For one, it’s difficult to keep track of payments that have to be made by check or are made online. Plus, you have to ensure that everyone respects your personal budgeting method as much as you. A bunch of fat envelopes full of cash may be a temptation to some.

But in order to make the envelope system for personal budgeting work, you have to commit and stick to it. Respect the system or it won’t work. Sure, you can sneak some money out of the clothing fund to finance your entertainment envelope – but really, you’re only cheating yourself. The envelope system is only effective as a personal budgeting tool if you play by the rules.

To resist the temptation to mess with the system, make an envelope that’s simply labeled “fun.” Use this for any kind of impulsive or discretionary spending that doesn’t fit into a pre-existing category. Of course, budget this envelope accordingly – use sparingly!

Dave Ramsey’s readers report that the envelope system is very successful as a personal budgeting solution. Some readers stated taht they spend about $60 less on the envelope system. Another says that they appreciate how the envelope system helps them keep track of their personal budgeting by  letting them know where each cent goes.

This perhaps is the true strength of this personal budgeting system: awareness. When you use a debit card, it’s just one big pool of money and it’s easy to fritter it away without knowing where it all went. But when you use the envelope system, you can quickly identify which envelopes are empty first! This will help you figure out where you are spending all your money and can help you change your ways if you are overspending.

Give the envelope system a try. If other personal budgeting tactics have failed you, this simple, but effective method may do the trick. Try it for two months before disregarding it. It can take awhile to get used to. But it just might pay off.