Happy New Year!
If you are starting the year with a financial goal we may have just the thing for you. Creating a savings plan and managing fincances can seem daunting, but it doesn't have to be. The envelope method of budgeting is a a tried and tested method of budgeting that can help you take control of your spending.
What is the envelope method of budgeting?
The envelope method is a cash-based system that involves dividing your money into different categories and allocating each of these categories a specific budget. You then place the cash in envelopes labelled with the corresponding category. These categories can include anything including groceries, fuel, pets, bills or takeouts.
How does the envelope method work?
Once you have narrowed down your budget categories, you withdraw the amount of cash you have allocated for each category and place it in the respective envelope. Throughout the month, you only spend the cash from each envelope for its designated category. This method helps you visually see how much money you have left for each category and prevents overspending.
Why is the envelope method effective?
The envelope method is effective for several reasons. First, it promotes mindful spending. When you have a limited amount of cash in each envelope, you are more likely to think twice before making a purchase. This helps you prioritize your spending and avoid impulse buying.
Second, the envelope method eliminates the need for credit cards or debit cards for everyday expenses. By using cash, you are less likely to accumulate debt and more likely to stay within your budget.
Lastly, the envelope method provides a clear visual representation of your financial situation throught the month. You can easily see how much money you have left for each category and adjust your spending accordingly. This level of transparency helps you make informed decisions and stay accountable to your financial goals.
How to get started with the envelope method
Getting started with the envelope method is simple. Here are the steps to follow:
- Identify your budget categories: Determine the different areas where you spend money regularly.
- Set a budget for each category: Decide how much money you want to allocate to each category.
- Withdraw cash: Take out the total amount of cash you have allocated for your budget.
- Label and fill the envelopes: Label each envelope with a category and place the corresponding amount of cash inside.
- Track your spending: Whenever you make a purchase, take the cash from the corresponding envelope and record the transaction.
- Adjust as needed: If you find that you are consistently overspending in a particular category, you may need to re-evaluate your budget and make adjustments.
Remember, the envelope method is a tool to help you manage your finances, but it also requires commitment. It may take some time to get used to this system, but with practice, it can become second nature.
So, if you're looking for a simple and effective way to budget, give the envelope method a try. It's a practical approach that can help you take control of your finances and achieve your financial goals.
Do I need anything to get started?
Starting out is easy, you just need a single envelope per category. However when you get used to the method you may prefer something more sunstantial to house your money, that's where our budget planners come in.
They are made of a gorgeous PU leather, personalised with your name / family name and come with 5-10 wallets labelled with your chosen categories. Since the wallets are see-through it makes keeping track of your finances even easier, as you can see what's left in each wallet at a glance. The planner also has space for loyalty cards and discount coupons, (so you don't forget to use them) helping your money go even further.
What do you think? Could the envelope method be what you need to take control of your money this year?
PS. If you are tackling your budgeting this year we have a savings challenge printable which is FREE when you sign up to the Melidy Makes newsletter.
