After my last post about saving money and starting a budget sparked a lot of interest, I thought I’d spend some more time going more in depth on creating a budget.
The strategy I am going to be going over today is referred to as an envelope system, and I learned about this strategy from the book I Will Teach You To Be Rich By Ramit Sethi. The basics of this system is that you start by picking categories that you spend a lot of money in each month, and then create an “envelope” for them. Then you pick an amount of money each month that you want to spend on that category and put that money in the envelope. It is important to be realistic with yourself, the purpose of this isn’t to restrict your spending, but rather to be more aware of it, and build healthy money habits.
Here’s an example of how you might do this:
- Envelope 1: Groceries – $100
- Envelope 2: Eating out – $50
- Envelope 3: Entertainment – $50
You can make more envelopes as needed, and you can use them for whatever expenses you may have. Another rule to follow is that you are allowed to borrow money from another envelope if you need to, however, once your envelopes run out of money you are done spending for the month.
I want to stress one major thing that’s so important when budgeting, and that is to be realistic with your spending’s (you can find out your spending habits by tracking your credit/ debit cards each month and categorizing your spending’s), and then set goals that you will actually achieve that don’t make you feel like you’re saving every penny. Doing this is why most people fail to follow a budget. It’s human nature to want to go out and have fun, so do it, but do so in a responsible way by limiting how much you can spend each month.
March 13, 2021 at 12:45 am
I definitely feel like being aware of the money you have, and your expenses are significant as it is wise to develop my spending habits around them.
I also feel like several other factors can determine how you budget like if you have a vehicle, pay rent, have roommates to help with expenses, and several other things.
I know for me personally, I only really spend a significant amount of money when I do grocery shopping every week, and even then, I usually do it with my roommates, so we just pay for what we need.
March 15, 2021 at 9:44 am
I find the envelopes to be an interesting way to handle actually visualizing your money and spending. Oftentimes we see just one number in our bank accounts and don’t give much thought beyond that. By doing this, one can more easily visualize their spending and their budgets to know exactly what money they need and have left over.
March 16, 2021 at 4:15 pm
I like how you came to the idea of the envelopes. I feel that college students waste a lot of their money on items that they want rather than need. They then get into a boat of ” I need money” but then they look back and see what they used it on. This is a great blog to explain to college students.