When I quit my job and began staying at home with my children, I needed to get a lock down on our expenses. Our income dropped by 50%–so we pretty much needed to get it together!
Couponing helped but I always felt the that I never actually “knew” how much I was spending every month. Then I discovered this system that got our spending together called the “Envelope System” This helps us see the actual cash and keeps us from over spending. Basically it works like this:
- Total up your monthly income
- Write a list of your monthly expenses and then write each expense on an envelope.
- Every time you are paid, split the money amongst the envelopes, make sure all expenses are covered
- Throughout the month spend like you should to cover the expenses
- If you find that you have run out of money in one envelope–you must take away from a different envelope-to make up the difference. OR you can simply do without.
For us..any left over money goes into our savings.
To Begin the Envelope system is pretty simple.
You must know your budget for the month. I usually sit down a couple days before the 1st and calculate everything that we are expecting.
Our family only has 5 different envelopes all labeled:
- — Clothing
- — Entertainment (this has little separate envelopes inside a larger one labeled: Spending Money, Date Night and Eating out)
I stick to a Grocery budget and never overspend because of this. Also, my Stockpile money goes to any great deals that I may want to stock up on (ie. Juice, Pasta) and leaves me feeling confident about saving money. This also challenges me to find ways to pay less out of pocket so that my stockpile money goes further.
Using cash makes the world of difference. You think twice about using cash vs using a credit card or your debit card. Cash just seems more valuable–so it tends to move slower.
Any other bills that we have come directly out of the bank via online bill pay. This is extremely hopeful because we do not need to sit and think about writing checks. We set the bills for the month–they are never late and we don’t have to worry about not having the funds to pay for them because we may have “overspent” on dinner last night. 😉
My list of envelopes above are expenses that I know that I can control. Things such as Electric and water–fluctuate and I can only do so much to control those expenses–so I leave that to the bill pay. You will be surprised at how much you save by using this method–I was shocked to realize how much we used to spend as a two-income family!