Envelope Budgeting- money management for everyone
What is envelope budgeting?
It is basically dividing your money into different envelopes marked with different categories.
When you receive your salary/wages, pay your regular bills online. For example:
Rent/bond; Water & Lights; Rates & Taxes; DSTV; Medical aid; Insurance; school fees/ child care if it is over R1000; etc.
Then take what is left over and divide it into envelopes. I do my shopping online so I use my debit card for this but as I buy milk, bread, fruit and vegetables weekly I have an envelope for groceries.
How much milk and bread do you use in a week? We go through 6 x 2 litres of milk and 6 loaves of bread. I also have big fruit eaters so I budget for every 2 weeks. I buy the Pick n Pay in store bread as it is cheaper. I only go once a week – usually on a Sunday morning.
If it is less than R1000 per month, pay cash.
How often do you fill up your car? We fill up twice a month so I do this at the beginning of the month, when we get paid, and then put enough money into an envelope to cover the other tank in the middle of the month, plus a little extra (in case).
I put away a minimum amount so that, no matter what, we have the basics for Shabbat. 3 challot or 2 and a challah roll, 1 or 2 soft drinks, 1 cake/ or sweet pastry for Shabbat breakfast, as well as a Shabbat treat (I usually have a slab of chocolate to share). If you make your own challah then you won’t need to put aside as much.
I assign some pocket money for my two younger kids to cover school tuckshop and other expenses that come up. For the 2 older ones, my husband and I, I give a lump sum. Even though my son and I manage to save some of our money my eldest daughter and my husband are not great at budgeting.
To cover medical levy’s and doctors who want payment upfront. (You may not use this for a while but you need to keep this topped up!)
Truworths, Woolworths, Edgars/ Jet, etc.
I have made up some amounts for this example
Childcare: R1000 Medical: R500
Petrol: R600 Pocket money +/- R2000
Shabbat: R 520 Maaser/tithe R1000
Groceries: R1150 Shop cards: R2000
Prepaid electricity: R500
Total in envelopes: R9200
Set up rules as to how you want to use this system.
Here are mine.
1. Do not borrow from one envelope to use for another category
2. When the money is finished, too bad, you have to wait till next month.
3. Only take enough money to the shops for what you need. eg If you are only
going to buy milk and bread, then only take that amount of money with you
and no extra.
4. Put all the change back into the envelope.
What you might like to do is write on the back how much you put in and each time
you spend, deduct it from the total.
Whatever money is left over you can choose to roll over, put into a separate savings
envelope or account, or use it as a special extra treat.
It really works! You can actually see what you are spending and, therefore, you are
more in control of your spending.
Discipline- you become more disciplined with your spending habits.
If there is an emergency – eg you have a burst geyser, need a new tire, you have the
cash on hand.
You have a tangible budget and you definitely tend to spend less when you have to
pay actual cash!
There is no overdraft. You can’t spend it if you don’t have it.
You don’t spend on unnecessary things.
You don’t miss payments
You need to convince the whole family to participate.
You have to go to an ATM or into the bank to draw the cash
In the beginning it can be confusing, where do you take the money for clothes from?
Or even furniture?
You don’t get ebucks or Absa Rewards for spending, although you may land up in the
end saving more than the points you would have earned.
Some people don’t like the envelopes, if that is you then use a small accordion file
with different sections.
Allocate the money as soon as you are paid.
Stick to your rules, but be flexible until you have a system that works for your family.
Pick the categories where you tend to have the most trouble budgeting.
Give this system at least 3 months and watch it work!