November 06, 2013

The Envelope System of Budgeting

Do you find it hard to budget your expenses for the whole month? Or maybe ended up short and use your credit card to cover your expenses. Many of us try to budget to the best that we can but failed to manage it because oftentimes we never stick to our plan or an unexpected expense came up and ruin the assigned budget.

A friend of mine never did any list or plans to budget their expenses and ending up borrowing money from me even though her funds is greater than mine. Usually she was lure by the things she saw in a snap and buys anything that she and her family want. If you are also like my friend I’m talking about then you should also considering the budget system using the envelopes. This will help you minimize overspending and maybe can save some money for the future.

You will need a calculator, paper, pencil and envelopes to begin with the envelop system of budgeting:

1. Know how much money or funds to spend for the whole month.

2. List down all the categories where you will spend the money like bills, food, fare or gas, school allowance and others. After deciding the categories and their cost write it down in each envelop and place allocated money in each envelop. Any kinds of envelopes will do. 

3. Do not forget to put also an envelope for emergency funds and savings fund. Money in this envelop can be deposited in your bank account or invest it in mutual funds.

4. Fill each envelope with money, and then spend it according to their categories.

5. Stick to your budget and use the allocated emergency fund for things you want to buy.

6. Adjust the allocation of budget if necessary, do this every month and you will know and trace where your money go.

Happy budgeting! 

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