The envelope system is one of my favorite tools for staying out of credit card debt. If you are new to the envelope system, then this post will be an awesome one for you. Saving a small amount of money each month really adds up. This is the power behind this system. Here are some actionable tips on how to set up the envelope system and make it work for you and your budget.
Be sure that you have your budget already filled out. This is the 4th post on my personal budget series so be sure to catch up on the ones that you might have missed like making a budget, how to make ends meet, and how to pay off debt.
Make a budget
Knowing just how much money you have going in and going out is absolutely necessary if you are going to get far with money. The best and truly the only way to know exactly what you are spending is to have a written budget. In my post about creating your budget I guide you on creating your budget, keeping track of expenses, and making adjustments. There are so many budgets on Pinterest and it would be a good idea to have one printed out or you can write it out on a sheet of paper like I did for the first few years.
Keep track of expenses
Keeping a log of all of your expenses is a priority. You will need to know where you are spending money in each of your categories. When I write down my expenses, I like to put them in categories. So instead of writing down “toilet paper- $12” I write “toiletries- $12”. That way, at the end of the month when I am adding it all up, it is easier to see which items belong to which categories.
You should have main categories for each item that you spend money on each month. I do have a “miscellaneous” category for things such as shipping, stamps, or odd small purchases that come up occasionally. Also, try not to lump too many items together. I know a lot of people want to lump their groceries, toiletries, and pet supplies all together, but if you have a bigger that usual purchase of pet supplies that month, it takes away from your grocery budget.
Evaluate your expenses
At the end of each month you will need to evaluate what you are spending in each category and if that category needs an envelope. I tend to keep envelopes for all purchases that are not a steady monthly amount. Examples of this would be:
Back to school supplies
If you plan all year for an event that comes yearly, it won’t be such a big blow to the budget. If the “event” such as a home repair or a blown tire only comes sporadically, it is even better to have money in an envelope. You will just save money until you need it. That way, you only have to dip into your “emergency fund” for when you have a large emergency that you haven’t planned for.
Be sure to check out my post about how I utilize our envelope system to get inspiration for your own system.
Dedication will pay off
Truly, when you are saving into your envelopes each month, it tends to add up quickly. Before you know it, you will come to love the feeling of not having to plan for a large expense in one month. You will learn the freedom that comes from saving smaller amounts each month.
But, this is the digital age, right?
Yeah, I am totally a paper and pen kind of gal, but I know that not everyone is. There are a few apps and services out there that will help you manage your envelope system without using the paper. Good Budget is an app that you can use in lieu of the paper envelope system. You can probably get by with the free version or there is a $6 version as well.
The envelope system can work for anyone no matter how much or how little you make. It is especially important for those who are living with very little wiggle room in their budget. Take the steps today to get it started. Set up your budget, first thing. Email me if you need feedback on this. Keep track of your expenses so that you know what you are spending money on. Then evaluate those expenses. Your dedication to the envelope system will pay off and help you feel just a bit more free from the weight of the unknown. I know this post will help you decide on how to set up the envelope system and make it work for you.
What kind of expenses get you in a rough spot each month or each year? Do you think the envelope system is something that you will commit to?
(Make your own durable envelopes with this tutorial here from Full Time Full Life)