Budgeting can be very difficult. For some it’s harder than for others. Some need much more help and a real system to keep track of their expenses, and make sure their bills get paid on time and that they have the money to do so.
One method I used to utilize is the envelope method. It’s very easy and ensures that you will have the money when you are ready to pay your bills.
The first thing you need to do is make a list of your short term expenses (those that you pay EVERY month), in order of most important, to least important. For example, lets say that your list looks something like this…
5. Credit Card
6. Transportation expenses
You will take six envelopes and write on each one what it is for. Depending on how often you’re paid, will determine the amount you need to put in each envelope. If you are paid monthly…put the full total on the envelope…that is how much you will put in when you get paid. If you are paid bi-weekly, divide your payments by two…and write it on the envelope…that will be how much you put in each pay.
After you have it set up and know how much you have to put in for your short term expenses, you can move on to the long term expenses…the one’s you don’t pay every month, but maybe once
a year or a few times a year. This can include anything you may be saving for. Again, in order of importance.
7. Vehicle repair/inspection
11. Emergency fund.
You would take how ever many more envelopes you need and write the title on them. These will be your “secondary” set of envelopes…the ones you put into after your efficiently filled your first “priority” set. If you know how much you need for these expenses, put set amount on them, and you can either put your extra money in them one or a few at a time…by order of importance, or put a little money in each as often as you can.
If you have a set amount you need, you can stop filling one if you wish when you have enough money in it…until you make the payment, then start filling it again.
This is a system that I have found to work well for me to really keep track of where my money was going, and also for a few others I have known who have had problems with money management.
This system works very well, as long as you don’t “borrow” money from your envelopes. Especially if you are not a great money manager….as you will forget or won’t have the money to “put back” into the envelope and can end up short.
It’s a good system and can help keep you on track. Some other options is you can put your envelopes in order by payment date, and write the date on the envelope that you wish to pay them each month. Also, when you get a bill, you may put it in the envelope with the money, then it won’t get lost and will be there when you are ready to pay it.