How To Use Envelope System For Budgeting Plan
Dave Ramsey’s envelope system is one way that you can learn to budget your money and have a little fun at the same time.
The envelope system is also called the zero-based money management system because basically you spend until you get to zero!
Let’s see how it works and then decide if this is a budgeting system you can live with.
HOW THE ENVELOPE SYSTEM WORKS
Track your expenses for at least a few weeks to get a feel for how you’re currently spending your money. This is outside of course your ‘regular’ bills such as mortgages, car payments, credit card payments, and utilities.
Target any big areas of fluctuation such as grocery bills, clothing expenses, entertainment and break them all down.
These are areas where people usually end up overspending and where you can cut costs.
The envelope system can help you look at your spending habits and not fix them per se but adjust them to where they can become more manageable.
Now, get some real honest-to-goodness envelopes and set up some categories.
Maybe your envelopes will say 'entertainment' on one, 'grocery bills' on another, 'clothing' on yet another, 'going out to eat' on another.
You can make up as many envelopes as you want.
Now put some real cash in those envelopes! Based on what you have been spending but perhaps more importantly what you know you SHOULD be spending or want to spend in those areas, put that much cash in each of the envelopes....maybe $100 for dining out, maybe $50 for entertainment, maybe $100 for clothes and gosh knows how many dollars for groceries.
You’ll need to determine if that money is going to last you a week or 2 weeks. If you get really good at it, monthly expenditures are great for the envelope system. Starting out though, you’ll need to think in terms of shorter time frames until you get the hang of it. Baby steps and all that!
Now spend! Yes, I said spend......not hoard. This is the way that you’ll learn how to budget your money.
This is a very visual way of seeing how to discipline yourself when it comes to money and spending habits.
ZERO MEANS ZERO
Zero means exactly that - zero. If you go out to eat twice in 1 week and you spend the $100 cash you have in the envelope, that means you can’t do that anymore until you get paid and add more money to the envelope. No ifs, ands or buts about it.....you’re done going out!
Same goes with the clothes envelope. If you spend your cash down to zero for that envelope, you don’t have anything else to buy with so you’ll just have to wait for a refill of the envelope next payday.
USING THE ENVELOPE BUDGETING PLAN WITHOUT CASH
What if you don’t like cash spending? Well, you could still write the number of dollars on the envelope and then use your debit card to spend that much money.....but ONLY that amount of money.....period....and no fudging!
LEFTOVER MONEY IN THE ENVELOPE SYSTEM
What if you have money left over in the envelope at the end of the week or 2-week period? Good for you!
You have several choices then….you can keep the money in the envelope because you earmarked it for that.
You can also put it back into savings because you did good! You saved money rather than spent it!
Or you can roll it into another envelope where you project you might be able to use a little extra cash.
ZERO-BASED MONEY MANAGEMENT
I think this is an excellent way to teach kids to budget as well.
You can do the same on paper or on the computer but somehow feeling the money, seeing the actual amount that you put into the envelope for a certain aspect of your spending life and then staying inside those lines makes you more dedicated to learning appropriate spending habits.
One of the major reasons that people get into debt is spending beyond their means.
By employing a zero-based money management system, you can’t possibly overspend because once it’s gone, it’s gone!
Of course, employing other frugal spending methods in the background also helps you save money and keeps you from going into debt.
The envelope system can work for trimming a budget that has a few flaws in it and give you a great amount of satisfaction in the process.
HOW TO USE THE ENVELOPE SYSTEM FOR BUDGET PLANS
If you have thoughts or experiences with the envelope system of money management, please leave your comments and input here to enrich the article!
Or if you have other systems that you use to live within your means, please share them.
Learning to budget is an ongoing affair in life or should be.
There are always new ways to learn to budget or spend our hard-earned dollars.
Whatever works to keep us solvent is what matters but sometimes, it's nice to look at something as boring as our budget in a new light.
Wishing you every success along the budgeting highway of life~!
More Information on the Envelope System of Budgeting
- Budgeting For College Students:Money Management Tips...
It is important for college students to learn money management tips to reduce college expenses.
- Money Management Software
As the new year approaches, most of us look back through the previous year and see what kind of changes can take place to make the following year more productive. Our money management throughout the...
- Money Management and Teenagers
If only I had a dollar for every time I have said those words whilst parenting my three darling 'rugrats' as to why they cannot have this, that or the other 'must-have thing' that they desire! With that...
- Money Management Basics
Mind Blowing Money Management Basics you can Follow Everyday in your Life without having a Mathematical Brain!Insightful Money Management Tips In Simple Words and Illustrated Examples. How To Manage Money? How To Save Money? Find Real world Answers..
- Money Management For College Students
The college years are a time when money is always tight and yet it seems easy to spend it freely. How is that possible? On the one hand, as a student, your probably aren't earning a lot of money (if you're...
- Budgeting and Money Management using Mint.com
In times of such financial hardships (dont want to say the R-word) it is very important to maintain a strict financial discipline. How many of us have a budget and follow it up at the end of every month? I...
- How to Teach Kids About Money Management
Money management is an important skill for anyone to learn. By teaching your kids about money early, you are giving them the knowledge necessary to succeed financially and not fall into the same debt trap that...
- Money Management 101 - The Jar System
I pride myself as someone who manages my money well. I know exactly how much money comes in and how much goes out. I was quite happy with my money management system. However, recently I learned a new...
- The Beauty of a Zero-Based Budget
In our quest to better manage our money, we have all turned to budgeting at one time or another. And that's a good idea. Budgeting helps us see where our dollars are being spent. They help us allocate our...
- Dave Ramsey Envelope System of Budgeting
Budgeting can make or break your finances. But budgeting isn't easy for a variety of reasons, many of which are built into your brain. Some people have an aptitude for juggling the abstract values that a good...
- Budgeting to Get Out of Debt
- Budget Life #2: Cash Only Please
Welcome to the second great idea of budgeting in the column called
- Envelope System Budget
If you have never heard of the Envelope System, here is a quick run down. The envelope system involved labeling envelopes in your budget category and placing the money from the category into the envelope. When...
- Money Jar Budget
You can use jars or envelopes to manage your money with the money jar budget system and it can help you get your spending under control so you can: 1. pay down debt 2. live on a budget 3. save money...
- Saving Money with the Cash Envelope System
Paying cash for as many things as you can is a really good way to save money. It can get confusing though, when you get your cash out for the pay period and you have a few hundred dollars in your pocket. ...
- Budgets Made Easy
A true monthly budget is a list of all income and planned expenses. For most of us, a budget is simply a way for us to keep track of our monthly bills and a means to get them paid each month. Just thinking...
- An Alternative to a Cash Envelope Budget - Sorry Dav...
Once long ago my family went on a cash only, envelope system budget. Unfortunately for my family, this system was overly burdensome. What we have started doing is a modified envelope system.
More by this Author
This is a rather macabre subject, but let’s face it.....having a funeral can be really, really expensive. When I think about my own funeral, I think I might literally turn over in my grave or something if I...
SAVING ON MAILING AND SHIPPING COSTS This is a subject I know quite a bit about at the moment. As the holidays wound down this past season, I’m still thinking about the $130 we spent to ship presents...
Let's explore the difference between being frugal and being cheap. Which is better, cheap or frugal? And is there really a difference?