Budgeting - The Envelope System

I always wondered how the "Envelope System" worked for budgeting. I assumed that you take the cash, put it in the envelopes for each category and then when that cash was gone, it was gone. It works somewhat like that, however, you don't actually put cash in the envelopes.

Frugal Fabulous Finds had an article on how this system works exactly. Here is the link! I'm going to start using this system today, but I'm going to use paper folded into envelope shapes (because I don't have envelopes)! :)