Part of our Healthy
Budgeting for Financial Health
budgeting has been around for a very long time.
if you've never used it personally, you probably recall your mother
- or even your grandmother - tucking cash away in individual envelopes
in today's mostly cashless society, envelope budgeting is simply not
as effective as it once was. However, with some planning, it can still
be used to assist you in keeping to your personal budget.
begin with Envelope Budgeting 101. The concept is easy - you take
a stack of envelopes and write a spending category on the front of
each one. They might look something like this:
have more categories - it's your budget, so you get to label them
however you want.
you've separated your finances by expense type, you figure out how
much you are allowed to spend in each, and you put the corresponding
dollar amount in the correct envelope.
go to the movies, you pay for it out of the entertainment envelope.
When you run out of entertainment money; you're done until the next
month, when you get to fill up the envelope again. It's a nice system
and definitely helped many a family stick to a fixed spending limit.
comfortable carrying cash around with you, it can still work exactly
as outlined; however, if you're like most people and rarely even
have a dollar bill on you, it's time to revamp the envelope budget.
This can be done in a couple of different ways.
create a spreadsheet, or chart, with each of your expense categories
in a separate column, and beneath it the total dollar amount you're
budgeting for the month. When you pay your rent, deduct that from
the rent column. When you go out to dinner, save the receipt, and
deduct that from the entertainment column. If you're religious about
saving receipts and recording your expenditures when you make them,
this system will work quite well. When you've used all your allocated
funds in one area, you are out of funds until the following month.
option is a mixture of the two. You can use the chart/spreadsheet
for fixed payments, such as your mortgage, and other normal house
expenses, such as utilities. Then you can use the envelopes for entertainment,
groceries, gas, etc.
are benefits to this mixed approach because where most people fail
on their budget isn't with fixed expenses, but the fun ones, like
buying clothes or going out to dinner. By having the cash already
set aside, when it's spent, you have an empty envelope, and you can't
get much more of a visual reminder that you're out of cash!
some tweaking, and self-control, envelope budgeting can still be an
effective tool in managing your money. Regardless of what type of
budget you use, be sure to be honest about your income and expenses
so you don't end up in the red at the end of the month.
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