The envelope budget

Posted on April 18, 2008. Filed under: Budgeting, Consumer, Family and Life |

Budgeting can be very difficult. With one swipe of a credit card you can buy now and pay later for virtually anything. With this type of mindset it is hard to budget for expenses. The envelope method of budgeting makes keeping a budget a lot easier and will prevent you from spending beyond your means.

Start by figuring out how much you spend on each category of your budget. Food, utilities, clothing, luxuries etc. For each category you should then obtain an envelope and write the name of the category on the outside. At the beginning of each month, place the appropriate amount of CASH in the envelope.

You are to spend only the amount that you place in your envelope. This will help you visualize the amount of money you need through the month and how much you are actually spending. You will not realize how much the grocery costs you until you start paying with cash rather than a swipe of the card. Handing over a stack of $20 bills can be a bit demoralizing at first, but it is for the greater good.

The envelope system works because you only spend what you have. You cannot reach into the bottom of the envelope and find more money, nor can you borrow from other envelopes because chances are that they are running low as well. For people who cannot stick to their own written budget, it is a lot easier to follow through with the envelope budget. You will quickly forget about your savings accounts and how much you are actually saving by keeping money in itemized envelopes. When you have only $50 allocated to spend on eating dinner out, you will make it will make your decision, and quite possibly the overall enjoyment of that dinner, much more valuable to you. The key is to stick to the system and only use each envelope for its intended use.

You will find that the envelope system really helps you visualize your budget as dollar bills rather than payments that need to be made. Give it a try.


Read Full Post | Make a Comment ( 3 so far )

Recently on Friendzy...

Why target date funds may not be good retirement plans

Posted on April 17, 2008. Filed under: Financial Advice and Advisers, Investing and Saving, Money Management |

Why the FED rate cuts are not indicative of lower consumer rates

Posted on April 16, 2008. Filed under: Banking, Credit |

Will the next president hurt your bank account?

Posted on April 15, 2008. Filed under: Family and Life, Money Management |

Gold prices indicate economic instability

Posted on April 14, 2008. Filed under: Banking, Debt, Investing and Saving |

A look at how your credit score works

Posted on April 11, 2008. Filed under: Credit, Credit Cards, Debt |

Let credit cards pay you

Posted on April 10, 2008. Filed under: Budgeting, Credit Cards |

Online banking versus brick and mortar

Posted on April 9, 2008. Filed under: Banking, Investing and Saving |

Peer to peer lending

Posted on April 8, 2008. Filed under: Banking, Budgeting, Credit, Debt |

Raise your insurance deductibles and feel safer

Posted on April 7, 2008. Filed under: Consumer, Insurance |

Scratch and dent sections are negotiable

Posted on April 4, 2008. Filed under: Budgeting, Consumer |

Liked it here?
Why not try sites on the blogroll...