1. Money

How To Set Up an Envelope Budgeting System

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One of the easiest ways to track your spending is to switch to an envelope system. This is the budget system that people used before checking accounts became common. Most likely, your grandparents used this system or one similar to it. Generally, you will switch the categories that are not bills. This allows you to continue to pay bills from your checking account. However to make the envelope system work for you, you should stop spending stop using your checking account except to pay bills.

Difficulty: Easy
Time Required: 60 minutes

Here's How:

  1. First, you will need to have your budget with you. Then you will need to determine which categories you are going to switch to the envelope system. This should your budget amounts that involve discretionary spending. Common categories that are used are groceries, eating out, gas money or cab fare, entertainment categories, fun money, clothing, miscellaneous and household expenses.

  2. Second, you will need to add up these expenses and make a withdrawal at your bank. Generally, it is best to write a check and request the required denominations you need for each category. The easiest way to do this is to write it down before you go to the bank.

  3. Third, you will need to label your envelopes and put the correct amount into each envelope. Find a safe place to store your envelopes. Generally you may not want to carry that much cash with you. You may want to carry twenty dollars with you to cover unexpected expenses. When you get home you will take the amount you spent from the correct category.

  4. Fourth, as you go out to go shopping or to have fun, take money from the same category. You do not want to take the whole amount with you, because you will spend it in one trip. This is especially true for your food and entertainment categories.

  5. Fifth, stop spending money on that category as soon as you run out of money in the envelope. You can transfer money between categories if you need to. You should not begin to charge your expenses, once you run out of money in the category. You need to discipline yourself to stop spending. This is the key to making any budget work for you.

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