How a Box of Envelopes is Your Best Budgeting Tool
Do you like saving money? Silly, right? Of course you do! I love to save, and we have a friendly little competition at our San Mateo storage facility, All American Self Storage, to see who can come up with interesting and effective ways to save. I’ve discovered a way to upgrade the best budgeting tool to allow for envelope budgeting to enter the 21st century.
Have you ever heard of the envelope budget? It is about as low-tech as they come, and, when used properly, can save your family hundreds each year. Since many payments are digital, I have created a system that takes that into account. The crux of envelope budgeting is simple. You create a detailed budget for your needs for the month and only spend that amount for the month. When you run out of allocated funds for each expenditure, game over.
How to get started
If you have not kept a budget to date, this can prove a little challenging. Start with the easy expenses, or those that are static – rent/mortgage, phones, television services, insurance, car or student loan payments, credit card bills, etc. Gather your envelopes and a favorite pen (yep, this is low-tech) and label an envelope for each expenditure as well as the monthly cost.
For those expenses that are more fluid, such as food, gasoline, utilities, meals out, clothing, etc., label for them as well and go back and look at past months to get an average amount for each.
Go to the bank
Take out cash, yes, that’s right – cash to fill your envelopes with the designated amount. You’re on a cash plan now, and believe it or not, you will find that this gets so easy. After you’re done catching your breath at this major life change, kiss your debit/credit cards goodbye and place them in a drawer.
Pay in cash and what to do if you can’t
For your monthly expenses, pay in cash for as much as possible. That is not really an option for some payments, so I found a workaround that I shared with my co-workers at our San Mateo self storage facility. Have you seen the ads for online banks? Some popular ones are Aspiration, Chime, Simple, and Ally. For digital payments, I transfer the exact amount into these accounts, one for each expenditure. For example, Simple is the account I use to pay for our family’s phones. Every month, I add the total due to this account. The bill is set up with auto-payment, so I transfer and forget it.
As with all household finance issues, you need to evaluate how the prior month’s budget worked in addition to making plans for the next. After a few months of tweaking, you will be able to see more clearly where your income is going. Good luck!