The Envelope Spending System (Managing Your Budget)

My last practical post was on how I prepare my monthly budget, it also includes links to the Budget PDF template I use each month.

 

In today's Practical Post I want to explain how I manage my Monthly Zero-Based Budget. It is called the Envelope Spending System. Simply put, each item in your budget that can be paid with cash you place into a dedicated envelope (e.g. Groceries, Gas/Petrol for the Car).

 

These envelopes tend to be for variable expenses, meaning they do not have a fixed amount as opposed to your monthly rent/mortgage payment. Because these expenses vary month to month, you need to name how much you are able and want to spend on these items (you do this when you are preparing your Monthly Budget). Once you get paid place that amount in cash into the envelope. When the cash in the envelope is gone and spent, you must wait for next month's pay check to divide your income out into each category envelope.

 

This is a useful tool to help you control your spending. By setting up your envelope money system you are telling your money where you want it to be spent. Sometimes we allow ourselves to overspend, but this system puts you in complete control of your money.

 

If you want to see how I put together my envelope system in another blog post please leave a comment request below. Check out my next Blog post on Thursday, a thoughtful post about money.

Being Honest with Yourself about Your Money (Thoughtful Thursday)

I want to start this post by saying that being honest with yourself about your money is meant to be a positive experience, to allow yourself to understand and see where you are at. Being truthful to yourself will provide greater dividends for you going forward.

It does not mean you need to feel bad or shameful about where you are financially; you may even be in a very positive financial position. The point I want to emphasise is that when you choose to be honest with yourself about your money you will begin to treat any money that comes your way with respect, appreciation and you will start to keep a lot more of it too!!

Money habits are inherited and built up over time. But the fact you are taking the time to think about your money and personal finances means you are ready to make active changes in how you save and spend your money.

What do I mean when I say, "Be Honest with Yourself about Your Money" -

• Impulse Buying: Be honest that this is an impulse buy. That for you the purchase is a want not a necessity. The next time you are faced with another impulse buy you may choose not to spend your hard earned cash and keep it for something you really want or have been waiting for a long time.
• Credit Cards: Be honest, does it really feel good to have a running balance over time with a credit card or does it cause you unneeded stress? Having store credit cards is often a status symbol yet they often have the highest credit card rates on average. Think about how less stressful it would be if you had no debt, and you were able to save money and pay cash for all of your purchases? I believe you would feel like a Fashion Rock Star therefore you would look like one too!!
• Not Writing out a Monthly Budget: Be honest, do you really know where all of your money is going over the course of each month? Are you aware of your current financial position? Sometimes you might say to yourself, "Next month I will write a budget." But then the month comes and you put it off again. A budget tells your money what to do (click here for my post on my monthly budget routine), and you feel more in control of your money. Knowing how much money your expenses are helps you find better deals on your monthly expenses...so you can save more money to better your financial position.

The best way to make positive changes with your spending and saving habits is to be totally honest with yourself. We as people tend to buy goods and services to impress other people. Your money habits will become more beneficial to you once you stop worrying about the societal pressures and begin to choose an authentic life you are happy with.

And always remember when you are being honest about your money habits don't be hard on yourself. Life is journey, not a destination.

I know you will find that by being honest you will change your financial routines and find that you have more time to spend with good friends/family and on the parts of your life that really make you happy...and you will have more money in your savings as well!! Honestly.

 

Zero-Based Budgeting (Sunday's Practical Post)

I budget each month one week before I get paid. I know that many people do not like this word and feel that it is a tedious task or too confining when it comes to their money. But it actually has the opposite effect. A budget provides a plan and therefore the permission to spend how you want. You are essentially telling your money what you want it to do. Let me explain the steps that I take BEFORE I even get paid. I have a greater control of our spending, and it also lessons the money stress that can sometimes occur in life.

1. Telling your money what to do before you even get paid is the first step. This is very important. And the approach I take is called the Zero-Based Budget. In order to do this I use the budgeting tool by Dave Ramsey, Monthly Cash Flow Plan (click here for PDF).


2. Fill in the blanks. Remember to be honest. Write out exactly what you will earn in your next month, what you will spend and what you want to spend. Ask yourself what are your needs vs. wants. In filling in the blanks spend all of your income/pay check/maintenance making sure to write in money you will put away for savings. You basically spend all of your income so that you are left with zero.


3. When you get paid execute the budget by using the envelope system (click here for this next practical post).

It takes a couple of months to get used to using the budget, but it does really help you stay in control of your money....rather than your money being all spent when you get paid. This method allows you to build savings and be happy about your personal finances. 

My next post is my Thoughtful Thursday Being Honest with Yourself about Your Money. I call these Thoughtful Thursday Posts and hope to discuss about our personal relationship with money, the economy and any ideas you the reader might comment on (just leave a request or comment below). Money is our life. We deserve a good life and that is what this blog is about.