Envelope Budgeting – The Basics

We live in a world of plastic. Card swiping is the norm whether you are going to the grocery store or stopping to pay the electric bill. The problem with living a debit card lifestyle is management. It is easy to lose track of your cash when it is a virtual entity. There are real benefits to counting out those dollars each time you spend. An envelope budgeting system makes the process visual. In an emergency, the experts here at PaydayLoansCashAdvance are around to help, but in everyday life, looking for ways to manage your hard-earned money leads to long-term financial health.

A Little History about the Envelope System

The envelope budget system has gained popularity over the last decade, but the concept began during the Great Depression. People were leery of putting money in banks during this time, because the institutions were unstable. Instead of making regular deposits, they labeled envelopes to cover their daily and monthly bills. As they made money, they would fill the envelopes. The benefit was they always knew exactly how much cash they had leftover for food. People were hungry and it was easy to overspend trying to fill their bellies. With this program, they made sure to pay expenses like rent and heat too.

Recently, envelope budgeting has come in fashion again. It is a proven system that makes sense for anyone who wants hands-on control of his or her cash flow.

Get Some Snazzy Envelopes

It is sort of defeats the purpose if you go out and buy expensive envelopes for your system. There is no harm in hitting the dollar store to find something aesthetically pleasing though or you might consider making your own color-coded folders with construction paper.

Think about how you intend to store the envelopes, as well. You can pin them to a bulletin board, keep them in a large wallet or use an accordion folder. Ideally, they will be somewhere out of the way but accessible. Once you have made that all important envelope design choice, it is time to do some budgeting.

Create a Budget

The key to a proper envelope system is in the budgeting. One effective way to handle budgeting is by keeping track on all the bills for one or two months. As you get statements in the mail, put them aside. Keep a notebook with you and track your spending too. Every time you stop for gas or buy groceries, write down how much it costs, so you can tally it up at the end of the week.

After accounting for every dollar during at least a 30-day period, sit down and create a written or computerized budget to prioritize and categorize your envelopes. The goal is to establish boundaries for monthly expenses. For example, how much do you need for food each week? Don’t underestimate – that will throw the plan off. You will end up dipping into other envelopes to make up for the error. Keep the numbers realistic. You can always make adjustments as needed.

Set aside a monthly allowance for things like clothes and emergencies even if you don’t consider them regular expenses, and don’t forget about entertainment. A financially solvent person doesn’t have to be boring – plan for some fun too.

Label your Envelopes

An envelope budgeting system is exactly what it sounds like, containers that define your budget. Once you create categories for spending, labeled envelopes to match them with a marker. Put the amount each envelope should hold on the face, so you know when you have allocated the right funds for that bill. For instance, if you need 700 dollars for rent, once that envelope has enough cash in it, the money goes elsewhere.

Put the envelopes you use daily or weekly towards the front. You will access the food packet more than once a month, so it just makes sense to put it ahead of the rent or mortgage.

Develop a Plan

Now that you have all the basics set up, the budget is made and envelopes are ready, all that is left to do is figure out how you intend to fill them. If you are paid every two weeks by check, you might go to the bank, deposit 10 percent of the payout, and then take the rest in cash. The money in the bank is savings; the cash goes into your envelopes. If you get direct deposit, stop at the ATM or bank one time for each pay and take out the cash you need to fill the envelopes.

Consider how much you want to contribute to each envelope per pay period. The exact method for managing the system is up to you. Ideally, you will add money to the regular expenses like food every time you get paid. Fill the monthly bills such as rent and phone as you see fit. You might add cash to your housing envelope until it is full and then move onto the phone, or do it in percentages. If rent is 35 percent of your monthly expenditure, than add 35 percent of the cash you have with each pay to that envelope until you meet the goal.

The true benefit found in envelope budgeting is the attitude. Once you set up a successful system, your mindset will change. You will start looking for ways to fill those envelopes even faster. You might take up thrift store shopping as a hobby or become the best super coupon user on the block. We offer you a temporary solution in an emergency at PaydayLoansCashAdvance.com, but it is up to you to create permanent ones through processes like an envelope budget program.

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