Envelope Balances and Account Balances are two different views of your financial picture. Account Balances talk about how much is in each of your real-world accounts. If you take all of the balances of your deposit accounts (like your Savings, Checking, Money Market account and your petty cash) and subtract the balances on your credit card accounts, you get your total balances per the Account Balance view of the world.

This, in turn, ought to be equal to the total of your Envelope Balances—which is simply another way of looking at the money that you have. The way of looking at it that gives every dollar (or drachma, yen, or doubloon) a particular job to do.

So while in the “real-world” some of your money is sitting in your Checking account and some is in your Money Market account (and some negative money is sitting on your credit card as a balance to be paid), in the Envelopes world, that same money is sitting in your Envelope balances ready to be spent only for the purpose specified by the Envelope.