We’ve all done it and we’ve all felt guilty for it. You only plan on spending $300 (or $200 or $100) at the grocery store, but when you get to the checkout, your total is $30 or $50 more. To spare yourself time and embarrassment, you just put it all on credit. This leads to debt and overspending. Need to break this habit? Use envelope budgeting.
When my husband and I were $80,000 in debt we had to figure out something to help get us out. I came across the Dave Ramsey series and really loved a lot of it. He is very inspirational and helped us develop a plan to “snowball our debt away.” One of his strategies is to use Envelope Budgeting where you put your monthly budget (in cash) into envelopes. When it’s gone, it’s gone and you can’t spend more.
Personally, even after getting out of debt, I still do some of this. I am visual person and seeing the money I have available for the month keeps me feeling comfortable and I know what I have to spend. If I am running low, I know I need to cut back. I use one of these wallets instead of actual envelopes, if you scroll down (on Amazon) there are a couple of options.
Lets check out the Envelope Budgeting system.
Set Realistic Budget Amounts
For envelope budgeting to work, you have to be realistic about how much money you spend. If you know you spend over $200 on gas every two weeks, don’t try to cut down to $100 per two week period. That’s just setting yourself up for failure. Pick amounts for food, gas, fun, entertainment, and other categories that you spend on every pay period. Make sure they are attainable but still appropriate for your income.
Also Read How to Live Beneath Your Means
Clearly Label Your Envelopes
You’ll need an envelope for each budget category: food, gas, entertainment, and so on. Label each envelope with its category and how much money you start the pay period with. Fill each envelope when you get paid and dedicate yourself to only spending the amount that is in each envelope.
Don’t Overspend or Borrow from Next Week’s Envelope
If you run out of money, you may be tempted to put it on debit, put it on credit, or “borrow” from the next pay period’s envelope. Don’t do it! It may be uncomfortable to adjust, but you’ll quickly get used to only having a set amount of money to spend.
Also Read Top 10 Habits of Frugal People
Save the Extra!
Challenge yourself to not spend the full amount in each envelope. Any amount you have left over at the end of the pay period should go into a savings jar or savings account. Use that money to build up your buffer or treat yourself!
Envelope budgeting is an easy way to limit your spending and only spend the money you actually have. Give yourself a few months to get used to it and reap the rewards!
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