As you know, one of my resolutions for this New Years was to look for ways to regularly check on my finances and try to keep our personal household budget under control. This envelope budgeting is another one in the same series. I did lot of research on this one, and seems like it’s pretty straight forward and perfectly doable.
I decided to take the plunge to see if it works. Well, it does! I was able to save a few bucks from my set budget. I’m sure my family and I will be able to do much better in the coming months.
First off, let me tell you what budget enveloping is, just in case you are hearing the term for the first time. Envelope Budgeting is the technique where you set aside part of your income, place it in a categorized envelope and spend the money from that particular envelope for that particular category in that particular month.
You can add a number of categories on few envelopes for that month. For example, Dining Out, Groceries, Clothing, Entertainment etc. So, if you placed $250 in Dining Out envelope, you spend the money from that particular envelope next time when you go out to eat. Spend as much as you want but make sure that you do NOT spend more than $250 if that’s what you allotted to that category. Similarly, if you placed $150 in your clothing or entertainment, you make sure that you do not spend a dime over that $150.
If you find your envelope empty with no more money to spend, STOP right there. No more spending on that category anymore. No borrowing from another envelope. You start again from your next income and start spending again, but not until you get your next paycheck.
If there is an unavoidable emergency, and you do have to spend extra, make sure to discuss the issue with your partner and take further action.
I decided to create these cute labels to stick on my envelopes. Main categories for my household are groceries, gas, dining out, clothing, entertainment. Make sure to list the categories that usually bust your budget every month and that you can actually control.
These labels have Category, Where and Amount.
When I am using Envelope Budgeting I can also control the no. of times I am going to the grocery store to buy groceries, or if I am over using the gas or spending too much on clothing. I reduced the number of trips I was making in my car last month when I found out that my “gas” envelope was running out of money faster. I stopped using my car for simple chores, I sometimes walked or used my bike if I had to.
In addition to keeping my household budget under control, my family and I are learning the discipline and the urges to overspend.
Would you like to try Envelope Budgeting System this month? Here are a few simple steps you can start with. Let’s start with preparing your envelopes.
Download these labels, print them and cut out with the scissors. Follow the steps to make these cute envelopes.
Once you have your envelopes ready, let’s move to the next important steps.
1. Set Up Your Budget.
Although this is the very first step, but many of us find ourselves stuck right here. How do you decide the budget for each category. Well, I use this cute handy budget binder that helps me keep my finances in check. I have determined the amount that we use for each category. Take an average for 3 or 4 months and decide on a budget.
2. Write Down Your Categories.
Main categories in my household are gas, dining out, entertainment, clothing.
3. Place Money In The Envelopes.
Once you allot the amount for each category, place the money in each envelope. I decided to allocate $100 to our dining out category. So, my $100 is going in that envelope.
4. Start Spending From Those Envelopes.
So the fun part begins. Once the envelopes are labeled and funded, you can go ahead and start spending. Make sure that you stay within your budget. If you end up emptying the envelopes, you are not spending in that category anymore. If you are left with some cash or change, AWESOME! Way to go! You are well on your way to saving money and disciplining yourself from overspending.
5. Do Not Forget To Mark Down The Amount.
When you spend an amount on groceries or gas, do not forget to fill up the label on the envelope. Write down the date, where you spent, how much and the remaining balance. That way, you will have the exact record of where your money is being spent.
Envelope Budgeting can be a powerful way to spend your money and staying within your budget. Try it for a few months and you will feel the difference.
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Do you use a Budgeting System in your house? Do share in the comments below!