Have you ever found yourself in a situation where at any given time you aren’t actually sure of your finances? Have you ever seen your bank balance and thought to yourself: “Where did all my money go?”

Managing a budget is never easy, especially if you have a family or multiple expenses and you need to stay on track in order to manage your lifestyle effectively and accurately without landing in debt.

Writing down what you spend, keeping bank and till slips are all very well, but what most people need is a system that will help collate all the data and keep you up to date with where you are at financially speaking.

The Envelope Budget System is a great budgeting tool that’s easy to use and efficient.

Here’s how it works:

Step 1: Create a budget. In order for the Envelope Budget System to work, you need to know how much money you are receiving each month and how much your expenses are (ie: how much money is going out). Get a good idea of your current financial situation by noting all of these down.

Step 2: Once you have your expenditures noted down, you can divide your expenses into categories such as food, gas, entertainment and so on. Then create a physical envelope for each of these categories, labeling the category name on each envelope.

Step 3: Fill your envelopes with the money that you have allocated to each category.

Step 4: Pay for your purchases out of the appropriate envelopes (ie: using the gas envelope every time you fill your tank with gas etc). Once you have spent the money allocated to each category in each envelope you must cease spending money in that category until the next month.

Step 5: Any leftover money you may have from other categories must be put into a savings account or used to help pay off any debt you may have.

Repeat these five steps each month. It will help you to see where you may be accidentally overspending or see where you may have allocated too little money. Adjust the budgets accordingly. The first couple of months will be a bit of trial and error until you have your budget properly worked out. You may run out of money before the month is over in the first month or two, but this is all a learning curve. Be honest with yourself about where you may be overindulgent and where you can tighten the financial belt. An advantage of using the Envelope Budget System is that you will very quickly be able to see how quickly and recklessly you may be spending your money in certain areas.

The Envelope Budget System also gives people the ability to visualize how their finances are broken down. Physically being able to see the envelopes serves as a reminder of how each budget for each category is doing. You will be able to tell immediately whether you can afford eating out this weekend or to buy that new pair of shoes. It teaches people not to spend money they do not have, therefore avoiding debt and feelings of financial hopelessness.

If a monthly system does not work, try a weekly envelope system. It may suit your goals better. If the idea of carrying cash makes you nervous you can still use your debit card and an envelope system, just subtract each purchase on the back of the appropriate envelope and stop spending on that category when you get to zero.

Using the Envelope Budget System means that won’t end up in the situation where you have swiped your cards many times and don’t know “where the money has actually gone”. You will be able to keep track and live a better, more financially stable lifestyle.

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