Are you finding it hard to stick to a budget? An easier way to stay within a budget is to use the envelope system budget. When you get paid, you divide all of your money into envelopes. Each envelope represents a different expense category. By dividing your cash into envelopes, you immediately know what you have on hand to pay bills, make purchases, and contribute to your savings. The envelope system may be old-fashioned, but it is still highly effective at helping people stick to a budget. You can't spend what you don't have. Steps to set up your envelope budgeting
1. Write down all your expenses. Don't forget annual expenses such as property taxes, vacation money and money for the holidays.
2. Label one envelope for each expense category. You will have an envelope for your car payment, house payment, groceries, utilities, gas, insurance, credit card bills, savings, personal care, entertainment, and all your other expense categories.
3. On the outside of each envelope write the budgeted amount for that month and the day it is due. (example; house payment 10th $790)
4. Use your envelopes for the purposes you have defined and nothing else. When the money is gone, stop spending.
Calculating Your Expenses
Calculating your expenses varies by how you are paid each month.
For weekly paychecks - Multiply your monthly expenses by 12 and then divide by 52. For annual expenses divide by 52.
For bi-weekly paychecks - Multiply your monthly expenses by 12 and then divide by 26. For annual expenses divide by 26.
For semi-monthly paychecks - Divide your monthly expenses by 2. For annual expenses divide by 24.
Monthly paycheck - Divide annual expenses by 12.
When calculating the amounts to put in each envelope always round up to the nearest dollar so you don't have to worry about change.