Taking Control of Your Budget with Envelopes
Posted on Monday, January 6th, 2014 at 8:00 am
Taking control of your personal finances and household budget can seem like a daunting task. More often than not we have no idea where to begin! In this post we’re going to cover a method, the envelope system, popularized by personal finance coach Dave Ramsey that seems to have worked for many. The basic gist of this method is that much of our overspending comes from how easy it is to use our credit and debit cards. The envelope system removes cards from the equation entirely by carrying envelopes of cash. Here are some easy steps you and your family can take to perfect to adapt this strategy:
How to Use the Cash Envelope System
Create a Strict Budget and Distribute Your Funds
The first step in this system is to create a strict budget accounting for all your available money. Your family will need to budget every penny and account for each category of spending (even for your savings!). Once you’ve accounted for each category you’ll want to designate an envelope for each one and fill them with the money you’ve allotted. At the end of each month you’ll refill your envelopes, but if you do run out of cash during your month of you aren’t allowed to refill it! Because you aren’t allowed to make any last-minute ATM runs you need to be extra careful when creating your household budget.
Include a Fun Category
Just because you’re on a strict budget doesn’t mean you can’t have some fun. What really matters when using the envelope system is that you account for your fun spending in your budget. Unexpected and unplanned spending is what you’re trying to avoid, so don’t be afraid to include an “Entertainment” envelope if you’d like.
Get Creative with Envelopes
This tip is definitely for those that are creative at heart. Since you’ll be using your envelopes quite a bit it doesn’t hurt to invest in sturdy reusable ones, or create your own out of artsy colorful paper. Putting your own touch on cash envelopes can make your budgeting more fun for the entire family. For templates, inspiration, and tutorials check out Kelleigh Ratzlaff Design’s post here.
It’s true, practice makes perfect. The first time you try the envelope system will be a challenge. You may fall short in some areas and overestimate your spending in others. The good news is that you get to try again in a month! Evaluate your spending habits at the end of each budgeting period to see which categories need less or more money, and then try again.