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 you need to buy items in that category, the money is taken out of the envelope. Money is not to be transferred from one envelope to the other, as this messes up the budget. The purpose of this system of budgeting is to ensure that you are not spending mindlessly, or going over-budget.

This system is great for people with an inclination to use a debit or credit card without writing down what the money was spent on. It's also great for those that forget to write down they spent money and end up overdrawn! The envelope system can be adapted to individual circumstances. There are also great products to use, if envelopes are not your style.

Lets first talk about the categories that are most common in the envelope system. Groceries, Eating Out, Gas, Lunches, and Clothing are the most common. After creating your budget you will know how much money is to be put into each envelope every paycheck. This money stays in the individual envelope until needed. With some personalities, cash is harder to spend than plastic. Thus, this method is perfect.

The types of products available to use for this method are numerous. I have seen people go to the bank and withdraw the amount of cash they needed for the envelopes and request extra money envelopes from the bank. They use a pen or marker and write on the money envelopes the category and just use that. Benefit of this is it's cheap and easy as the envelopes can be kept in purses, in drawers, or anywhere since they don't take much space. The downside to this is that the envelopes will wear out over time, plus it's not fashionable!

For other more elaborate systems there are plastic dividers often used as coupon holders. They offer numerous slots to hold a variety of categories, keeping all money together. This is good if you want to keep all money together in a safe place and just take out what you know you will need. This is a good idea if you are an impulse buyer. By taking only what you NEED with you, it makes it harder to buy what was not on your list. Having to go back home to get more money is a pain and will curb impulse buys. There are various styles and can be quite beautiful.

If you are not prone to overspending and debit cards are your style, there are computer programs that may work well for you. Keeping an excel spreadsheet of all expenditures can keep you on top of your finances, without the hassle of envelopes. This is only a great method if you are dedicated to keeping track of your spending. I have also heard of on-line programs that will help you keep track of spending as well. This is not a good method for anyone that doesn't keep impeccable records.

The Envelope System is a great way to get started on a successful budget. Keeping track of spending to minimize overdrawing is important to the success of your financial plan. Trying various budgeting methods until you find the one that works for your home is a difficult task, but well worth the effort. Becoming financial stable is a great feeling. Try the envelope system to see if it works for you. Determine which categories need to be included and set up your system. Relax knowing you are creating a secure future for your family.