If you get paid once per month, you will want to draft the amount for each category monthly. With your budget at hand, calculate the money you need to have in each envelope. Now that you understand the difference between fixed and variable expenses choose which ones from the variable category you will manage with the cash envelope system. We can also decide to start a meal plan to reduce our grocery bill and avoid wasting food. For instance, we can choose not to eat out and instead make meals at home to save money. In contrast, the variable spending categories are things that we have more power to control. But, ultimately, we can’t control what the bill will look like. For instance, we can save money on electricity by turning off lights we are not using. Your fixed expenses are mainly those we have little or no control over. I know that most expenses range a little bit from month to month, except for things like rent, mortgage, or insurance payments that may be set every month. Examples of variable expenses include the following. Your cash envelopes should be primarily for the variable spending categories of your budget.
Again, make sure to build up a spending cushion to avoid over-drafting. I recommend that you schedule your fixed expenses through direct drafts from your checking account. Investments (if you are not contributing with pre-tax money).Health insurance (if you are not paying it with pre-tax money).Utilities such as the electric, gas, and water bills.So, these are some of the fixed expenses you should be budgeting for. The key to using the cash envelopes successfully is selecting the budgeting categories to use it for.
Your mortgage or rent payment is a fixed expense, as well as your utilities and basic living necessities. Of course, it would not be practical to put money every month in an envelope just to turn around and drive to the bank and make the mortgage payment. But in my opinion, they think that way because they don’t know how it works. Check out Our Cash Envelope System Gold EditionĬhose which budget categories you will manage with the envelope system.Īs I mentioned earlier, some people think that the cash envelope system is not practical. However, to be a successful cash envelope spender, I recommend you to follow these steps. The cash envelope system is very useful in helping you create awareness on how you spend your money. It will all depend on how much of a spending cushion you already have in your checking account. Some people stuff their envelopes once a month, others every week or every two weeks. When the money in that envelope runs out, you can’t purchase anything from that category until you are due to stuff your envelope again. It consists of setting a spending limit on specific budget categories, pulling cash from your bank account, and stuffing it in a labeled envelope for that category.
The cash envelope system is super easy to use. You will significantly benefit from the cash envelope system if you are consistently overspending, over-drafting your checking account, or are trying to get out of credit card debt. Although many people will argue that using cash envelopes is not convenient or practical, it is the most effective way to stick to your budget and save money. The cash envelope system is one of the most effective strategies you can implement to organize your finances.
0 kommentar(er)
