The Envelope System
The envelope system has been doing the rounds for years now, its not a shiny new thing. Its common knowledge that debit and credit cards are the biggest budget sucking items around. When you pay with plastic, it does not feel like money so the temptation is there to just spend. We have all done it i'm sure. It's pay day, you know you have money and while browsing the shops you spot something that you want. You might umm and arr abit first as to whether you can actually afford it but rather than physically see that you dont have that money spare right now, you pull out the plastic knowing there is money in the bank. This is where the envelope system is perfect!
How does the envelope system work?
Its simple. You have x amount of envelopes pre written with the various things you need to pay for each month. On pay day you separate all your money and place it in the corresponding envelope. For example - my shopping bill a month is £240. On pay day £240 is placed straight into the envelope labelled groceries and the only money i spend on food and household necessities is from that envelope. You do not pull money from any other sources to put in there, once it has gone its gone, until the following month when you refill it.
The purpose of the envelope system is to teach yourself how to budget and how to be strict with your spending. Set a reasonable amount and lower it if needed as the months go on. When i first started doing this i had a whopping £500 a month shopping budget (food and cleaning products) As time went on and circumstances changed i cut this in half. I did however face a problem with this. I am paid weekly whereas hubby is paid monthly. His wages pay the bills and the rent, whereas mine pays for food, clothing and fares/petrol. I usually do my shopping monthly but lately i have been shopping weekly due to convenience so budgeting my weekly money is pointless as it is spent each Monday anyway. I have noticed that my shopping bill is creeping up again so we have decided to switch things around. His wages now pay for the rent and shopping and my money pays the bills. I can now separate all the bills into weekly amounts and each week place the money needed into an envelope ready for when it needs to be paid.
How to start your own envelope system?
- Work out your total income and plan a reasonable budget for each thing you need to pay for. Mine are Sky, Water, Council Tax, Mobiles, Broadband and Debts as rent and shopping are already covered. Make an envelope for each.
- On payday(s) Fill each envelope with the amount you have set and put the envelopes away.
- Through out the month spend what is in the envelopes. Once it has gone stop spending for the month. Do NOT borrow from other envelopes. You have to be strict in order for this to work (obviously emergencies are different)
- If you have anything leftover in a set envelope at the end of your pay cycle, spend it on a treat or put it into savings. The choice is yours, it is guilt free spending as your necessities are covered.
I keep a envelope for emergencies. It contains £20 and does not get touched unless there is an emergency. It is enough to get a taxi to the hospital and home if i had to.
There is lots of really fantastic information on the internet about the envelope system but this is the basics. You are also not confined to using plain boring envelopes. Get crafty and make something really appealing to you.
Here is some of my favorites from around the web.