Using envelope system for budgeting to strenghten your financial discipline

Although it may seem old fashioned today, an envelope system for budgeting is still one of the most effective ways to prevent over spending and strengthen your financial discipline. Once you start using this system you will quickly be amazed at how well it works, and how much money you waste each month. All that is needed to set up this system is a pen or pencil and the required number of envelopes. Make a list of all your spending categories, such as eating out, gas, groceries, clothing, entertainment, spending money, and others. One important note is that you do not need to use this system for your mortgage and utility bills if you prefer to do online billing and automated payments for these monthly payments.

Once you have determined your envelope categories then you simply write the category on the envelope. Once every category has an envelope you are ready to start. Determine your monthly budget amount after any automated payments are made, and then withdraw this amount from your account. Put the correct amount for that category in each envelope, so that when you are done all of the money is in the appropriate envelopes. Now that the money is budgeted it is easier to stick with your budget. As you pay bills and make purchases you will take the money for each payment out of the appropriate envelope for that category. Once an envelope is empty and there is no more money in it then you are done spending on that category for the month. You can also use this system on a weekly basis, but monthly is best because most bills are due once a month.

Using an envelope system for budgeting can help you get a better idea of where your money is going, and which categories seem to be overspent each month. Most people who try this system realize just how much money they are wasting each month, and this helps to strengthen their financial discipline. The envelope system of budgeting can do the same for you if you stick with it. Another factor is that this system lets you see just how much money is being spent and how much is left in physical terms. If you only have one hundred dollars left in your clothing budget and you see a dress you want for ninety dollars, you may think harder before making the purchase when you realize you will only have ten dollars left for clothes and can see this fact.

One of the advantages about using envelopes to do your budget with is that this system works no matter how many or how few monthly categories you may need. It is easily customized to fit your specific household financial needs, and it is very inexpensive as well. Organizing this system only takes a few minutes and can be used together with financial software if you choose, to make your budgeting even easier and more effective. The envelope system for budgeting is convenient, versatile, and very easy to use, and can be a big help in strengthening your financial discipline.

The information supplied in this article is not to be considered as medical advice and is for educational purposes only.