How Envelope Budgeting Helps Save You Money
How Envelope Budgeting Helps Save You Money
Envelope budgeting is a system which has been around for a very long time. It’s actually considered very old fashion these days, and if you’ve never used it personally you may have actually seen your mother or your grandmother doing it without knowing it. These days, it’s more common to operate in a cashless environment. Unfortunately this can also cause many problems with overspending, and creating excessive debt. By going back to a more old-fashioned standard of envelope budgeting, you might be amazed at just how much easier it is to handle your finances.
Envelope budgeting is actually quite easy to do. All you do is get an envelope for each category of spending in your household, and write the category name on an envelope. So you may have one envelope which has mortgage or rent written on it, another one which says utilities, another one which says gasoline, another for groceries, and so on. How many you have will depend on your own personal lifestyle in such a neat. Just be sure to have one envelope labeled with each budget category.
Once you know the types of expenses you have the budget for you now need to figure out how much money you can spend for each one. Some of your bills stay the same each month, so those are easy. Right the amount of your mortgage or rent on the front of that envelope, and any other static expenses should be written on the front of their envelope as well.
For those expenses which do not have a set spending amount each month, this is where the budgeting portion comes in. Allocate a reasonable amount for each category, and write that amount on the front of the envelope.
Now each time you get paid, all you have to do is simply put cash into each of those envelopes. If you are paid monthly it’s quite easy to separate the cash into specific envelopes. If you’re paid weekly however, then you would need to put one fourth of the month budget into each envelope on every payday. So if your rent is $1000 per month, you would need to add $250 to the rent envelope on each payday.
Doing this consistently means you will always have your rent money on time every time. You’ll also have the money to pay your utility bills, you’ll have money to put gas in the car, and you’ll have the money needed to buy groceries as well.
Using the envelope budgeting system system makes it very easy to make sure you have money for the bills that must be paid. It’s also a wonderful way to make sure you have extra money for entertainment and fun. All you need to do is create an envelope for the fun stuff. And even if you can only add a few dollars each week to it, you will have enough money to go out and do something enjoyable at least once each month or two.
The trick of course is to be sure you only spend the money that’s available in the envelope for the given budget category. If you want to go to the movies or go out to eat for example, you must have enough money in your movies and dinner or entertainment envelope to pay for it.
