I wanted to provide an alternative method of budgeting, due to the fact that making up a budget and just paying those bills doesn’t always work. If you’re like me, I’m very “visual-spacial” and I have to physically see things because I cannot always visualize them in my head. Physically seeing and touching things can make them real, in a person’s mind.

This system is VERY simple. The envelope system of budgeting and saving is a popular method that helps individuals manage their finances effectively. It involves allocating money into different categories or “envelopes” to ensure that expenses are properly planned for and savings goals are met. Here’s how it typically works:

  1. Categorize your expenses: Start by listing all your regular expenses and financial goals. This can include categories such as rent/mortgage, utilities, groceries, transportation, entertainment, debt repayment, and savings.
  2. Determine your income: Calculate your total monthly income after taxes and deductions. This is the amount you have available for budgeting and saving.
  3. Set budget amounts: Assign a specific amount to each expense category based on your priorities and financial obligations. Be realistic and considerate of your income and expenditure patterns. Remember to allocate a portion for savings as well.
  4. Create physical or virtual envelopes: Traditionally, people used physical envelopes to represent each expense category. Nowadays, you can also use digital budgeting tools or apps that mimic the envelope system. Assign each envelope to a specific category and label them accordingly. Even newer systems have clear plastic pencil case type envelopes/holders (for each budget category) bound in a three ring binder system, so nothing gets lost or separated. Use what works for you!
  5. Allocate funds: When you receive your income, distribute the appropriate amount of cash or allocate virtual money from your bank account to each envelope/category. This ensures that funds are set aside for each expense.
  6. Monitor and track expenses: As you spend money throughout the month, track your expenses and monitor the remaining balance in each envelope/category. This will help you stay accountable and avoid overspending. Update the envelopes as necessary if you need to adjust the allocations.
  7. Rollover and reallocation: At the end of the month, evaluate your spending patterns. If you have money left in certain envelopes, you can choose to either roll it over to the next month or reallocate it to another category that may need more funds.
  8. Savings and financial goals: The envelope system also emphasizes saving money. Allocate a specific envelope for savings, whether it’s for an emergency fund, retirement, or other financial goals. Treat it as an essential expense and prioritize saving regularly.
  9. Adapt and refine: Over time, you may discover that certain categories require more or less money than initially allocated. Adjust your budget accordingly to better align with your evolving financial needs and goals.

One of the draw backs to this system is keeping your money safe and from being stolen. This budget system would definitely have to say locked up, in a fire-proof safe, because of it not being with the safe physical (and insured) confines of a bank. Just something to keep in mind…

The envelope system provides a visual representation of your budget, helps you make informed spending decisions, and promotes responsible saving habits. By following this method diligently, you can gain better control over your finances and work towards achieving your financial objectives