Another Use for Envelopes…

Last week I told yall how Andrew and I got our budget rolling.  As we tried to keep track of our spending, we noticed we were often spending more a month in certain allotted areas and often spending more than planned altogether!  We use envelopes to solve this problem.

This is not a new concept, and I by no means came up with it, but I would highly recommend it!  Here is how it works:

1. Decide on core categories of budget beyond normal bills (groceries, clothing, eating out, entertainment, etc.). Label envelopes for these categories.
2.  Decide how much is you want/need to spend this month in that particular area.  Be frugal, but also realistic; if you have been spending $400 on groceries, you probably won’t be able to spend only $100.
3.  Total how much cash you will need for the month and withdraw it.  Put the specified amounts of money in each envelope.
4.   ONLY USE THIS MONEY TO BUY THINGS IN THOSE CATEGORIES!!!  This is the key.  When you run out you are done (don’t pull out that credit or debit card)!  Doing this makes you stay on budget.

If you really follow the “envelope system” you will find it is one of the easiest ways to actually follow the budget.  You won’t have to go back and enter individual transactions into your budget; it is an instant update of how you are doing for the month. At any given time you can look in the envelope and say, “I have $____ left for ______.”  There is no question.  The key and biggest caution is stick to it!  That is, if you run out of eating out money and you are only half way through the month, then you don’t eat out anymore.  As time continues you will learn how to make the money last all month and even have some left over!

So try it for a couple months!  See if it helps you keep on budget!