The Envelope Budget
I’ve tried everything over the years to manage my money, but nothing is as successful as the envelope budget. I attempted a budget, but a budget for me was just a list of good intentions. Like joining a gym and never going, or buy a whole bunch of vegetables that rot in the fridge.
I tried tracking my spending several different ways. I tried writing down my expenses in a notepad. I tried using a spending tracking app, I also tried software that automatically put my spending into different categories and it didn’t change anything. All it did was make me feel guilty about the money I’d already spent. The thing is that tracking your expenses is kind of like driving your car by looking in the review mirror. Tracking your spending is also a lot of work. I wasted hours of my time tracking my spending only for nothing to change.
I tried setting up sub-accounts with a million different transfers but that was a nightmare because I would spend out of my main account and then I would have to transfer the money from the right sub account back to my transaction account or onto my credit card. It was complicated and hard.
I had read about people using an envelope system but it just sounded so 1950’s. I was looking for some fancy app to help me but I read a study about how it’s much harder to spend physical cash than it is to spend on credit cards and I thought why not give it a go and it was amazing.
It’s so easy. It’s the only thing I’ve done that’s actually worked. Here’s how it works. I did a budget and worked out how much cash I needed per week. Then on Saturday I got the cash out and put it in my envelopes. I’ve got 4 envelopes in my wallet; Groceries, Petrol, Alcohol/Gambling and Entertainment/Take Away. I can spend what’s in the envelope and nothing more. If I run out of money I have to make it to Saturday before I can put more money in my envelope. If I’m running low on the groceries money, it’s mince on toast. The best thing is you can physically show your partner/kids how much money you have it’s not just abstract numbers in space. The first couple of months I got it completely wrong, and you will too so don’t worry.
Paying bills online? No problem. Have one sub-account called ‘Bills’ to use for online transfers, bPay, and direct debits.
We’ve put together a Personal Budget Worksheet you can print out and worth through. Just highlight the sections you think should be envelopes.
You’re all set to save. Let us know how you go via our Facebook page!
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