Envelope Budget System

Personal Finance Budgets for Stay at Home Moms

An envelope budget system helps you use budget envelopes to get your finances back on track. Having personal finance budgets makes it easier to be a stay at home mom while learning to save money.

Deciding to start a budget is easy. Actually designing your own budget and sticking to it can be the hard part.

Even when you create a budget on paper or with a computer program, it can still be tough to stick with. This is where the envelope budget system can be a huge help for many people on personal finance budgets.

In reality, this system is rather old. More than likely your grandparents use budget envelopes of their own to handle their money. Today we live in a card swiping culture, which makes sticking to a budget more difficult.

Here is a closer look at the envelope budget system, how it works, and the pros and cons to using this system. With this information you can decide if this is a good system for your family budget.

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What's an Envelope Budget System?

The paper envelope budget system, often referred to as a cash budget system, includes having several different budget envelopes, one of every category of expenses.

When you are paid, you designate a specific amount of money to go in each envelope (category) to pay for that expense for the month. With the following simple steps you can get your own envelop budget system created and in place.

Plan Your Budget

To start out with this system, you have to plan out a budget, which means knowing how much money is coming in and how much needs to go out. Make sure you create a budget that reflects the financial situation you're currently in.

Come Up with Categories
You'll need categories for your budget envelopes.Divide your budget into categories such as housing, food, clothing, gas, entertainment, and other expenses. Write each category on a separate envelope.

Put in the Money
Now you simply put the money allotted to the category into the corresponding envelope.

Pay from the Envelopes
When the specific bill is due, use the money from the envelope to pay for the specific bill. Remember, once the money is gone, you can't spend in that area until the next month.

Save the Leftover Money
At the end of the month, take the leftover money and save it. Another idea is to pay it on any debts you have to pay them down faster.

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Why Budget Envelopes?

Why should you consider even using the envelope budget system? Well, if you're a stay at home mom looking for an easy way to start budgeting money, this is one of the easiest systems out there to use. If this is your first time using a budget, this method can help you get your spending on track. After you use this system for awhile, you may find that you have learned enough about budgeting that you can simply budget with a program or on paper instead of having to physically designate money.

Advantages of the Budget Envelopes System

Of course, there are both pros and cons to using the envelope budget system. Here is a look at some of the main advantages to deciding to use this type of a budget.

Easier to Follow
One big advantage of this system is that you are forced into making a budget and following it. If you struggle with sticking to a budget, this is a great option for you. Using budget envelopes for semi annual and annual payments is a great idea as well, since it can help you offset the financial hurt when those bills become due.

Limit Spending
Another advantage of the envelope budget system is that it helps you limit yourself more than a debt card does. It's easy to spend more than you planned on with a debt card. When you can only spend the cash in the envelope, you aren't as likely to make impulsive spending choices.

Control Your Money
You'll really know where every dollar is going, which means you'll learn to better control your money. In many cases, you'll even notice that you're spending less each month because it's more painful to part with hard cash.

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Disadvantages of the Envelope Budget System

On the other side of the picture, you have to consider the disadvantages of the envelope budget system before you decide to use it as well. Consider the following disadvantages before you start using this system.

Emergencies
In emergencies, this cash only system may not work out so well. To avoid this problem, consider having budget envelopes set aside for an emergency fund.

Can be Awkward
Sometimes using only cash can be a bit awkward in certain places like a bar or restaurant. In some cases, servers may assume you want to leave them the rest of the money as a tip when you hand them cash, which can become a problem.

You May Still Need a Credit Card
There are times when it is impossible to realistically use cash, such as when you reserve a rental car or hotel room.

While cash is not always practical, the envelope budget system is still a great system that can be used to help you get on a budget and to follow that budget carefully. Just remember you may need to make a few tweaks to the system to make it realistically work for you.

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Related Pages

Why Budget?

Organize Your Budget

Sample Personal Budget

Organize Monthly Bills

What to Include in Your Budget

Evelopes Budget System

YNAB- You Need a Budget Tool

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