![]() ![]() The first thing you should do when using the envelope system is figuring out what areas in your life you want to include the budget. Take the stress out bill payment and the money out of the mattress with the modern envelope system.Make better decisions backed by data and insights Learn More Make a Category List for Your Budget That way, you already have the cash on hand when the bill does arrive. The modern envelope system makes paying the bills easier because instead of scrambling to find money to pay the bill when it arrives in the mail, you smooth the bills out by putting a little away for each bill each payday. Using a credit card and paying it off on time, every time will also establish or improve your credit history. Using your credit card to pay the bills means that you are earning interest for longer on your savings and you can take advantage of any loyalty programmes offered by your credit card merchant. This method works well if you have NO OUTSTANDING DEBTS already and you PAY YOUR CREDIT CARD BALANCE OFF IN FULL EVERY MONTH. Pay off your credit card in full every month with the allocated cash in your high-interest savings account to ensure that you accrue no interest on your card.Rather than using your savings, use your credit card to pay the bills.When the bills come, you know that you are able to pay them in full because you have saved your cash and allocated it towards the bills.Using your credit card to pay for expenses and they paying it off immediately can work out well if you use it wisely. Take Your Modern Envelope System One Step Further Keeping your money in a bank account means you are earning interest and it is still allocated into VIRTUAL ENVELOPES. ( Update: since writing this, there are now banks that allow you to have several savings accounts without fees so that you can divide each expense into a separate savings account.) I still allocate an amount each fortnight to the electricity account, for example, but it goes into a bank account instead of into an envelope. Now I use a spreadsheet in combination with my budget. When I first started this, I kept an exercise book with a page per expense, and a total page that equalled what I had in the bank. Keep track of how much you have saved and allocated for each category, by keeping a record of your savings account balance, broken up into your expense categories.The amounts that you allocate for expenses goes into a high-interest bank account rather than drawing cash and stashing it into envelopes.Once this is spent, that’s it for the week. Draw only the cash you need for the week’s allowance money and any other cash expenses like petrol and groceries.Allocate money for investments/ savings first, then any debts then fixed expenses such as insurance or utilities, then spend what’s left. Use your budget to calculate how much you need to put aside each payday for upcoming expenses. You will still need to budget your money and spend within your allocated budget.This system is similar in principle, but with a modern twist. This system worked fifteen years ago, but it doesn’t work now. The other is having a large amount of cash around the house isn’t very safe. One obvious one is that we don’t pay cash for many expenses anymore. The reality of handing over cold hard cash hurts, so you are more conscious of your spending and less likely to overspend. If you have any money left over in any of your envelopes, put this aside into your savings account.Īn important aspect of this system is that you are spending CASH. If you spend all the money you have allocated in the first few days, it means you have to make do until your next payday. You might also have a groceries envelope and a petrol envelope and an electricity envelope. For example, you may have an allowance envelope for things like coffee and magazines. It’s not necessary to have an envelope for everything you spend your money, on just the main categories. Withdraw the amount of cash you need and put it into separate envelopes, one for each expense category. Work out how much you will need for the groceries, how much for the petrol, how much for the bills etc.ĭivide your cash and fill your envelopes. The Traditional Envelope Systemīefore we get to the modern envelope system, here’s how the old-fashioned envelope system worked.Įvery payday, allocate your pay to different expense categories. First, however, I’ll an overview of the traditional envelopes system. ![]() I’ve outlined the modern day envelope budgeting system that I use below. Modern banking and finance mean that the old cash stashed in envelopes system is in need of an overhaul. It’s a time-honoured system because IT WORKS. Our grandmother’s grandmother used it to take care of the household finances. The envelope budgeting system has been around for a long time. Modern Envelope System (no jars or envelopes!). ![]()
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