Budget envelopes

5 Steps to successful Envelope Budgeting

Envelope budgeting is an easy way to create a simple easily manageable plan to monitor your spending. http://kasheringyourlife.co.za/index.php/2015/07/05/envelope-budgeting/

Every month thousands of South Africans struggle not to over spend. They use apps on their phones, spreadsheets on the computer, yet they find it doesn’t help.

I say well done for trying, now it is time to try something that really works!

Nothing beats cold, hard cash. When the cash is gone, the spending stops!

5 steps to beginning envelope budgeting:

Step 1

  • Before you venture into envelope budgeting, you need to know how much you really have to live on. Once you receive your salary, you MUST pay your regular bills first. Your rent/bond, water and lights, your rates, school/crèche fees, domestic salaries and medical insurance.

Whatever is left after you have paid all the main bills is what you will live on for the rest of the month.

Step 2

  • Choose your envelope categories. Choose categories where you have regular spends, but no fixed times or dates. Also choose ones where you have the most trouble staying on budget.

Here are some examples:-

  1. Groceries- I do monthly shopping, so I use my envelope for milk, bread, eggs, fruit and veg and a weekly treat, I know exactly how much most of this going to cost, so I only take that amount with me.
  2. Petrol or transport- whether you own your own car, car pool or catch public transport, you will need money for this. I fill my car at the beginning of the month and then put the amount of money into an envelope for use during the month. If you use public transport then you usually know how many trips you are going to make in a month and the cost, obviously you need a little extra trips on the weekends and travelling.
  3. Clothing- if you have store cards, it is time to pay them off, putting aside money to pay off these accounts is important. I know this is hard, I have kept my cards and use them twice a year, to buy winter and summer clothes, then I pay them off. I also only have cards that are on a 6 month interest free plan.
  4. Entertainment – This includes things like going to the movies and family outings. We budget for takeout at the beginning of each month and maybe one large pizza for the middle of the month.
  5. Gifts – keep track of friends and family birthdays and anniversaries also office parties and year end parties need to be taken into account, while you may not necessarily need to give a gift (see frugal gifting for ideas that won’t cost a fortune) you may need to go out for dinner with them, also the children’s classmates will be having birthdays, what I tried to do was find something reasonable and buy in bulk, since I make jewellery, all girls got watches made with beads in their favourite colours.

The tooth mouse/fairy also needs to leave money every now and then, so it is important to decide early on how much each tooth is worth and keep some money for that.

School outings- I don’t know about you, but our school goes on outing, has fund raisers and other events during the term, usually badly timed NOT to coincide with pay day. Having put aside money means you don’t have to say that your child can’t join in.

Allowances – You and your family need a little fun money, so decide how much.

Plan your categories
Plan your categories

Step 3

  • Once you have decided on your categories, create and label your envelopes. You can use plain white envelopes or download wonderful ones from Pinterest and other places on the web. I use plain envelopes, with a small income and expense note that I keep inside the envelope. This helps me keep track of where I am spending my money. This also allows me to adjust my budget according to my needs.
Insert a slip or stick it to the outside, to keep track of your spending
Insert a slip or stick it to the outside, to keep track of your spending

Step 4

  • Put away all your cards and learn to spend only cash. Even if you do envelope budgeting for 4 months and then go back to your cards, you will still be more aware of your spending habits. It is important that you only spend cash and do not use any cards. This doesn’t mean you have to take all your envelopes where ever you go. For instance, if you are going grocery shopping, sit down and plan what you need and only take that amount with you. Any change you get goes back into the envelope till next time.

Step 5

  • If there is money left over at the end of each month, you can choose either to keep it in the envelope to use it the next month, use it to pay towards paying off credit cards or other debt, or even put it in a money box or the bank and save it.

Since starting envelope budgeting, the whole family has become more aware of our spending habits and the children are learning about living within their means. Do you envelope budget? How good are you with your budget? Why not share some of your budgeting tips with us.

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