Envelope Budget
Keeping Your Spending Guidelines

An envelope budget system helps you to avoid overspending as you develop your personal spending plan. It is a simple, time saving method for family money management. It is the purest and most personally accountable form of budgeting, based on the premise of, "If I do not have it, I cannot spend it." No credit card finance charges for late payments, no bounced checks. Every expense is paid for with cash. (Sometimes checks can be used as you will soon see).

Grab some envelopes and write a spending category on each. The main ones are food, housing, auto, insurance, debts, entertainment, clothing, saving, medical, miscellaneous, child care/school, and pets. Please note that your categories MAY be different but should include all of these less the last two if you have no children or pets to care for.

Determine how much you will probably spend over the next month and write it on the back. Don't worry, it will change over the months as you will soon see. For right now, simply put down your best guess estimates.

If you get paid weekly or bi-weekly, do the math and write that amount underneath and circle it. This becomes the amount you actually put in your envelope budget categories each paycheck. Here is an example of what the back of yours could look like:

Now it is time to fill up with cash (yeah). Each time you get paid, put in each envelope budget category the amount you wrote on the back.

That's it! Now, as you spend money, take the expense out of the appropriate budget category, replacing it with the store receipt or a small slip of paper labeling what and where you purchased the item and for how much. You could also keep a one sheet log to save from having too many little pieces of paper.

You are now able to see and feel (sometimes painfully) where your money is going. Oh, did one of your categories run out of money too soon? You have two choices here: tough it out until the next paycheck or take from another category. But wait. Be sure to think through the ramifications of THAT category getting low. Constantly shifting money from envelope to envelope should not take the place of self discipline.

As you go along you will be doing some adjustments to each category's replenishing amount (the circled number on the back) as you go along and get injected with a healthy dose of reality.

Now, if three months later you are just shifting money around then the spirit of the envelope budget system has been ignored. Remember the goal of household budgeting (no matter what system you use) is to spend less than you make, reducing expenses as appropriate. What was that word used earlier? Self-discipline.

Using the Checkbook

Some people use this envelope budget system for only a couple or few categories, allowing the use of their checkbook to pay the regular bills. When using the checkbook, still use the envelopes; just keep a running total for each category, maintaining the mantra of, "If there is no money, I cannot buy." Yes, the government can do it because they are using your money along with millions of others'. You cannot because you only have a set amount to work with. Sorry.

There you have it. A free envelope budget system that works and once implemented sets you free from credit card debt, anxiety, frustration, and the nagging child who wants you to buy something. Just show him the empty envelope! Of course, he will say to just take the money out of another category. Simply reply, "OK, should we have less food, electricity or clothes?" See how freeing this becomes?

Speaking of being free of credit card debt, be sure to read about reducing credit card debt and let me know how the envelope budget system works for you!

We have many other budgeting tools to help you such as a wedding calculator.

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