Budgeting 101: Envelope System

Budgeting has always been my frenemy. I had to learn budgeting the hard way as a single mom. When I was a teenager, I would frivolously spend my money on magazines and CDs. When I became a single mom, I was living off of $20,000 while taking care of my son. To save money, I focused on being close to work so I walked to work every day that I did have to work even in the -50F wind chill temperature, I dropped my son off at my brother’s to save on daycare, and I used a system called the envelope system.

I think the envelope system is what saved my sanity during those troubling times.
What is the envelope system?

Think of the envelope system as a place to take all of your paycheck money and separate it into individual envelopes. Label the envelopes with your bills: gas, electricity, rent/mortgage, phone, grocery, etc. Think of what all of your money goes into and divvy up the money in the envelopes. If you put a certain amount away for groceries, make sure that you are not going over your budget. If you are over, put back some of the groceries. It’s hard, but you can do it! Any money that you get back, put back in the envelope.

I’m over! Now what?

Fantastic!!!  You can be smart about your money by rolling over to the next month or you could spoil yourself with something small like a coffee or go out to dinner.

Don’t cheat on your envelopes!!

Do NOT take from other envelopes!! The hardest part is to tell yourself no. If you take from another envelope,  you could be short on that bill.

Remember that the envelope system is there to help you out and not to hurt you.  Control your budget.
If you notice that thinks are going wonky and you need to adjust something. Figure it out. If it’s gas, quit going on trips or ration. If you have a fun money envelope that is dwindling down then eat leftovers, stay in and watch a movie, or read a book. Do something that you can do indoors versus outdoors.

If you have a crisis of some sort then work with your significant other or talk to a friend about it. See what else you can do. Is there something that you have that you could sell to make up that amount. Remember not to go into debt of your other bills in order to make up for that emergency. The worst thing that you can do is to take money from something else and not have the money to pay it back with.

Remember that life has ways of throwing curve balls, but you have to go with the flow. Do not let today and tomorrow get you down, because someday there will be a better future ahead. You just have to believe in it.

I still use the envelope system; The reason: BECAUSE IT WORKS! You may think that it is easier to remember what money you have to spend, but being held accountable for your actions with the actual cash versus remembering is what makes this system one of the best ever.

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