Using an envelope budgeting system is a simple way to budget plan. Being able to see exactly where your money is makes this an easy budget plan for even young kids to learn. Instead of simply writing things out on paper, the envelope budgeting system lets you see and feel the cash going where it is supposed to. Not only can this envelope system work for budgeting your normal household expenses, but it can also be an excellent way to pay down debt!
Planning a budget and learning to stick to a budget using envelopes is SO easy. The only supplies you will need are things that can be found easily and inexpensively. The skills needed are those any primary child would have.. being able to count money and use a calculator are the most technical things you will need to know how to do.
So, what are those easy to find supplies you will need? The first item you will need to set up your envelope budgeting system are envelopes. The second item you will need is a pen or pencil. Don’t let lack of a pen or pencil stop you though, even a crayon or marker can be used! A calculator is always a good idea when you are dealing with money figures. Even if you enjoy working with figures, it is always best to double check your work. The last thing you will need is your bills. Gather all of your bills into one place to make it simple to set up your envelope budgeting system in one sitting.
Once you have all of your supplies, this is how you will proceed. For each of your bills, you will create an envelope. In order to do this, start by writing the bill name on the envelope. Next, you will need to figure out how money is needed to pay that bill and how often it is due. This is good information to write on the envelope also. Divide the total amount due by the number of pay dates you have in each month. An envelope budgeting system will work with any pay schedule. This will be the amount of money you need to put into the envelope each pay date. Make sure this is written on the envelope so that you can see it easily!
Follow the same procedure for each one of your bills. Now move onto your expenses that are not billed. These would include food, gas, savings, and don’t forget to add in fun! Budgeting doesn’t mean cutting out all the little fun things, it means planning for them.
For non billed expenses, follow the same procedure as for the bills. Start by creating an envelope for each of these expenses. Figure out how much money you spend on each of these expenses on average each month, or what you think a reasonable amount would be. Write that on the envelope as the total amount due each month. Now, divide your amount by the number of pay dates you have each month, and write that figure down on the envelope. This number is the amount of cash you will need to put into that envelope each pay date.
One of the most important things to remember is to treat each envelope with the same importance. Having fun, adding money to your savings account, and paying your electric bill are all of equal importance to the envelopes! If you are putting the cash in each envelope each pay date, like you figured out, you will always know exactly what to expect to be able to pay or spend each month.
Be assured that the envelope budgeting system will work for any bill due schedule and any income schedule. Just set it up so you are dividing the total amount due on the due date by the number of pay dates between due dates. Here are a couple of example to show you some common bills that are not due once a month.
Car insurance is quite often a bill that is due every 6 months. If you are paid once a week, this is how you would need to set it up. Let’s say that your insurance policy is $400 due every 6 months. There would be 26 pay periods within that 6 month period. So you would divide the amount due by the number of pay periods. $400 divided by 26, which would equal $15.38. Therefore, you would add $15.38 to your car insurance envelope each week when you got paid. Make sure to write this weekly amount down on the envelope so you don’t forget it!
Another common expense that is not due once a month is a rent to own item. These items are most often billed once a week. Now if you get paid once a week this is easy, but what if you get paid every other week? In that case you would figure out the amount to set aside each pay date like this.. Say you have $16 due each week. Since there would be 2 payments due between pay dates, that would be a total of $32 due each pay period. $16 times 2 equals $32. You would write $32 down as the total you would put in each pay period, and by adding this amount to the envelope each time you are paid, you will have set aside enough money to make your weekly payments.
