How to make a budget: The Envelope System

One of the most important things you need to know if you want to save money is "how to make a budget." The simplest budgeting system for anyone that is interested in budgeting is the envelope system. This is a system that forces people to pay attention to what is being spent, how easy it is to spend money and to make important decisions. While it’s a simple system to use, the envelope system is a wonderful learning tool for anyone that is interested in getting their financial affairs in order.

There are different ways for people to approach the envelope system but the most effective is the simplest. In order to get started with this system of budgeting people need to have a budget set for themselves and a few supplies. The envelope system requires: multiple envelops, cash, a pen or pencil and a safe place for the envelopes to be kept. With those in hand, it’s time to do a bit of work.

Putting the Envelope System to Work

For every category in the budget, there needs to be a matching envelope. On each envelope, the category name and the amount that is supposed to be in each envelope. With all the envelopes labeled, place the correct amount of money into the envelopes and put them in a safe place.

 

This exercise does many things at one time. For many people, it is very hard to put the money into the envelopes and know that it can’t be touched for any reason other than what that envelope says. This makes people pay attention to how much they really have to spend and what it feels like to be financially responsible. As people look at the overage or shortage that comes with putting cash into an envelope, they are forced spend responsibly to stay on their spending plan.

When each bill is paid with the cash from the envelopes, it’s best to put the receipts in the correct envelope as proof the money was spent responsibly. When the bills have been paid and the money is no longer in the envelopes, put them back in a safe place to reuse again.

Tips for Success

For those that are struggling with the envelope system, there are some tips that can be used for success.

·         Take only a few dollars out of the discretionary spending envelope each day when going somewhere. It reduces the temptation of spending money that shouldn’t be spent.

·         Leave credit cards and debit cards at home or locked away in a safe place to reduce the temptation of swiping them.

·         When tempted to spend money, write it down. Detail what it was and why it was tempting to buy, what was going on at that time.

It’s hard to get used to this process and make it work well. For many people, it is hard to get used to spending cash and having to physically go to a payment station to pay a bill that is normally paid online or ignored. It’s supposed to be hard. It’s supposed to take getting used to. When the envelope system is easy to use and money is being used appropriately, it’s time to consider switching to a different method of budgeting and paying bills.

The envelope system takes time to get used to but it’s a system that works well for people that want to become healthier financially.

Sep. 5 14'
Amanda Kelly - Awww, I'm just seeing this post you're such an abtsluoe doll! Thank YOU so much for giving us inspiration with your fabulous invitations. To this day, almost at our one-year anniversary, we still get compliments on the creativity and uniqueness of our paper goods (and stamped goods)!
Jul. 7 15'

Prasath

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