An Envelope System

Sometimes the best ideas are so simple. There isn't any reason this can't be true when speaking of the dreaded budget also. The best tip I received while I was trying to get my budgeting under control was to use the "envelope system." With this system, you keep an envelope for each expense you regularly encure if it is to be paid less often than on a monthly basis. Some envelopes that I have kept include memberships to various organizations and car registration. Other examples could include auto insurance, health insurance premiums, and home alarm system fees. Determine the total to be due the next time you will need to pay a specific expense. Then determine the number of paychecks you will receive from now until the bill is due. Simply divide the total due by the number of paychecks received. This gives you the amount to store in that particular envelope each pay period. When the bill comes due, all you have to do is reach into the appropriate envelope and ... viola! This sure beats getting a $300 car registration bill in the mail and trying to figure out a way to pay it while keeping enough money for the rest of your current expenses. I recently took the money out of my car registration envelope and deposited that amount in the bank so I could pay my bill. It was so easy, and saved me so much stress.

You can also label an envelope with daily or weekly expenses, such as groceries, gas, and entertainment. Each pay period, deposit the amount of money you have marked for each expense into its envelope. And when the money is gone, you are done spending money in that category until the next time. If you are desperate for some reason, you can find another envelope with "extra" money in it from which to transfer money. In order for this system to work, you do need to be disciplined, however. No dipping into the envelopes for the reason that "something just came up!" Create an envelope system that works for you.

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