Last month my husband and I committed to not spending money for two whole weeks. That gave us time to reevaluate our budget and launch The Envelope System. The Envelope System is a simple way to track your budget. Here’s how it works:
1. Get On a Budget: Write down your expenditures and income. Plan out your bills and find out exactly where your money is going.
2. Estimate Spending Categories: Once you know how much you spend, create categories such as groceries, entertainment, and gas. Figure out how much you will need for a two week period or for an entire month in each category.
3. Get Cash: Fill each envelope with the amount of cash you’ve allocated. Once the cash in that category is gone– it’s gone. At least until your next budget period comes around.
This is my first time using The Envelope System. In the past I strayed away from the idea for a few reasons. First of all, I thought I was good at saving money so that meant I really didn’t need the envelope system. Neither my husband or I are big spenders so it seemed unnecessary. Secondly, I thought it seemed too strict. I worried about what would happen when the money ran out. Finally, I thought it seemed like a big hassle. It seemed like a lot of extra work when I was already decently good at saving money.
Finally we decided to give it a shot and it turns out I was wrong. Not only is The Envelope System easy, it actually offers a lot of freedom. I don’t have to worry about whether I’m spending too much on groceries or gas. And we actually have money that goes into an envelope for clothing and entertainment. I don’t have to feel guilty about buying clothes or going out to eat because there is money set aside for that. I will say that because we had some house guests we spent more in some areas. I’m trying not to focus on the mistakes and instead just try to get on track.
I’d love to hear your thoughts on the envelope system. What do you do when demands require additional spending? What do you do with extra cash at the end of a budget period? Would you recommend or be willing to try The Envelope System?
