Friday, 30 January 2015

The Envelope System Of Budgeting

In this day and age everyone is talking about budgets. I hear the chatter everywhere I go, “Do you have one”, “I’m going to start one”, “what’s the best one”, “I can never follow one” and on and on. What I’ve found is that people genuinely want to find a budget that works for them and their family and stick with it. Sounds pretty easy, right?

This first time beginner’s budget system was passed onto me by my mother, shortly after I moved out on my own more than twenty years ago. She called it the "Envelope system". Whether or not is has an official name, I couldn’t tell you. The system is fantastic when you can't afford one of those expensive accounting ledgers or an accountant or financial planner to walk you through the baby steps of getting it all together.

Start by taking a clean sheet of paper and dividing it into 3 equal columns. At the top of each column, write the following: 

  1. Monthly Expenses
  2. Yearly Expenses
  3. Income Sources- This amount is your total monthly income from all sources. Write each source down, add them up and then divide them by 4.

Monthly Expenses ÷ 4
Yearly Expenses ÷ 52 weeks
Monthly Income Total
Rent $400 ÷ 4 = $100. week
Phone $60 ÷ 4 = $15. week
Utilities $100 ÷ 4 = $25. week
Groceries $200 ÷ 4 =$50 wk
Renters Ins. $350÷ 52 = $6.75 wk
Car Ins. $1200 ÷ 52 = $24. week
My Paycheck for the Month = $1200.Take your monthly income and divide by 4. This is how much you have to put towards each weeks bills.
Total Weekly Amount $190.Total Weekly Amount $30.75Total Wkly Amt $300.

Next, under each column list all the expenses that you have. 

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