How to Use Envelope Budgeting to Increase Your Savings
It’s a digital world. Most of us pay our bills with autopay, view our credit card statements online, and use cash less often than we used to. But when it comes to paying down debt and saving money, nothing beats an old-fashioned envelope.
So, what is envelope budgeting, anyway? It’s putting cash in labeled envelopes to cover all your expenses. It’s a simple way to track your spending, and it gives you an honest picture of where your paycheck goes. If you’re struggling to stick to a budget, or don’t understand why you’re coming up short each month, envelope budgeting might help you figure it out.
Here’s how it’s done.
1. Create Your Categories
Saving money starts with an honest look at where your money goes. Get real with your spending. Where do you tend to blow your budget? Car washes? Manicures? Dinners out? Then, label envelopes for absolutely everything, including rent, utilities, and car expenses, too. Be specific as vague categories like “miscellaneous” muddy the waters. Here’s a quick list of categories to help get you started:
- Restaurants
- Coffees
- Groceries
- Entertainment
- Personal Care
- Gifts
- Gas
- Car Maintenance
- Rent/Mortgage
- Utilities
2. Assign Your Budget
Next, decide how much cash should go in each envelope. Be real about what you can and can’t spend. Start with the envelopes that cover expenses you can’t avoid, like rent and utilities. Then, pick your next priority, and so on. Clearly write the budget number on the front of the envelope. The number serves as a visual reminder of what you do – and don’t – need to spend.
3. Put Cash in the Envelopes
It’s that simple. The minute you get paid, whether that happens weekly, twice a month or monthly, put the budgeted cash in each envelope. For example, if you’ve budgeted $100 for gas and you get paid twice a month, put $50 in the envelope from each paycheck. That’s your $100.
4. Spend ONLY the Cash in the Envelopes
When you go grocery shopping, take out the money you need or take the envelope. If the cashier rings up a total that’s higher than your budget, PUT SOMETHING BACK. It’s the only way to truly stick to your budget, and it will help you become a lot more mindful of what you need, what you don’t, and how much everything costs. Once the money is gone, it’s gone. No more spending without going over budget.
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Envelope budgeting takes time to master. Sometimes, even with the best intentions, you need more money than you have on hand. If you find yourself in that situation, consider a loan with LendNation. We offer flexible loans that can get you the cash you need. The application is easy, and you can apply in-store or online, whichever is most convenient for you. Find a location or apply now.