Wednesday, November 5, 2008

Envelope System??

Anyone try this?

Envelope System

"The secret of getting ahead is getting started. The secret of getting started is breaking your complex, overwhelming tasks into small manageable tasks and then starting on the first one." - Mark Twain

The envelope system is very easy to use. Here's the basic principle: set up your envelope system based upon the amounts you put in each category in your budget. If you put $300 in the 'Food' category on your budget, then put $300 in cash in your 'Food' envelope.

The envelope system is a great way to help your control your money and spend wisely. Here are some more tips for starting a cash envelope system:

1. Budget each paycheck. You've probably been working out the kinks with your budget as you set aside your $1,000 emergency savings. Even if you haven't got it down to a science yet, keep working on that budget. The budget and envelope system go hand-in-hand and they are important money habits to establish.

2. Divide and conquer. Of course, there will be budget items that you cannot include in your envelope system like bills paid by check or automatic draft. However, you can create categories like food, gas, clothing and entertainment.

3. Fill 'er up! After you've categorized your cash expenses, fill each envelope with the money allotted for it in your budget. For example, if you allow $100 for clothing, put $100 in cash in your clothing envelope for the month.

4. When it's gone, it's gone. Once you've spent all the money in a given envelope, you're done spending for that category. If you go on a shopping spree and spend the $100 in your clothing envelope, you can't spend any more on clothes until you budget for that category again. That means no visits to the ATM and no stealing from another envelope!

5. Don't be tempted. While debit cards can't get you directly into debt, they can cause you to overspend if used carelessly. There's something psychological about spending cash - it hurts more than swiping a piece of plastic. If spending cash whenever possible can become a habit, you'll be less likely to overspend or buy on impulse.

6. Give it time. Like the budget, it will take a few months to perfect your envelope system. Don't give up after a month or two if it's not clicking. You'll get the hang of it and see how beneficial the envelope system is as you dump debt, build wealth and achieve financial peace!

1 comment:

BuffBabeGa said...

awesome idea.. and its helps.. that debit can get u into trouble. i work for a bank and see it every day... good job on writing things down and realizing a want and a need.. im going to follow along...

good luck !!