More talk about the budget

11 Apr
the envelope system: day one

Image by J. McPherskesen via Flickr

Hopefully, you have all written down every purchase you made last month and are ready to take a look at where your money actually went.  You can place them into categories such as groceries, gas, utilities, insurance, household items, entertainment, personal and other.  This is just an example, as these can be broken down further if that is important to you.  You may want to break down entertainment into dining out, movies, gym, fishing, whatever.  The way you create your categories will allow you to see different things about how you spend your money as well as ways to make small changes that could produce big savings results for your budget.

After you have identified where your money is going you have the ability to see if your spending reflects your priorities.  For instance, I have started taking my lunch to work everyday and my boss recently noticed this.  It must have looked better than his burger because he started calculating out-loud how much money he was spending eating lunch out.  I do not think he really thought about it before, but perhaps he was thinking that spending $150.00 a month on heart stopping fast food was not higher on his priority list than, say, a fishing trip.

Here is where the expertise of my sister, the Queen of Everything Money, comes in.   This beginning technique is called the envelope method.  After looking over your monthly spending you decide what level of spending you are comfortable with in each category of your budget.  You then get one envelope for each category, write the category name on each envelope, one for groceries, one for entertainment, etc.  Go to the bank and get cash for the total amount of spending that you have budgeted for the month and place the amount allotted for each category in to the corresponding envelope. Make all purchases with cash.  When an envelope is empty you are done spending money in that category for the month.  Of course you may find that you have extra money in other envelopes that you may choose to redistribute to another category and that reflects your actual priorities.  In order for this to be effective you cannot use credit cards for any purpose, only cash. The next month you can adjust the amounts so that they better reflect your real spending priorities. 

So if you find yourself asking yourself why you can’t save any money for a vacation, a new car, or retirement you now have the answer.  It is not high enough on your priority list.

 Of course, the Queen of Everything tells me that she has many techniques to share and the magic is in understanding which ones are the best tools for your particular situation.

Photo by J. McPherskesen

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2 Responses to “More talk about the budget”

  1. easylifestyles April 11, 2011 at 5:24 AM #

    Another great post. Thanks for sharing this. Spending time with my family is something that truly makes me happy in life. I enjoy reading your blog very much.

    Fun Family Activity Ideas

    • queenoffamilosity April 11, 2011 at 11:27 PM #

      Thank you. Time with family is a great joy that not everyone gets to enjoy. I looked at your blog and you have some great ideas on things you can do together as a family.

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