Envelope budgeting is a simple financial control plan that helps you to control monthly finances easily and effectively. Envelope budgeting for beginners involves putting away specific sums of money in separate envelopes for specific expense categories. Successful envelope budgeting involves strictly spending without exceeding the amounts in the envelopes. Any balance left in the envelopes at the end of the month can be used to give yourself a reward like a dinner out or if you want to be even more economical, you can either save the balance money or add the money to the designated envelope for the next month for added spending money if required.
The first step in envelope budgeting for beginners is to make a list of expense categories for a month. One category should be a saving category where a specific sum should be allocated for saving. The normal expense categories for a household include rents, mortgage payments, insurance premium, groceries, automobile and gasoline expenses, clothing and utilities.
The second step is to check the previous months income and allocate amounts from the income amount first for saving and then for spending on the different monthly expense categories.
The third step in the process of envelope budgeting for beginners is to keep envelopes ready to put the limited amount allocated for the different expense categories. For greater economy, you can save old envelopes and use them to put the money allocated in the different categories. Mark the envelopes with the specific category. Put the money allocated in the envelope marked savings into a savings account as soon as possible so that you will not be tempted to spend the amount allocated for savings. It is very important to keep a savings envelope because this amount will be of use if unexpected emergency expenses are required.
The fourth step is evaluating spending. When you pay bills or spend money on needs or entertainment, you need to take the money out of the specific envelope for the specific payment. Keep a strict vigil to ensure that you do not exceed the amount of money in the envelope. If you do exceed the amount in the envelope make a note on the envelope of the sum exceeded and reduce the amount allocated in the category and placed in an envelope for the next month.
This technique in the electronic age involves using budgeting software. Cash is not the only payment method available today. Payments made by credit card and debit cards and online transactions are easier and more efficient in the electronic age. These easy methods of payment also require a strict vigil so that you can stay within budget. Envelope budgeting software have graphic envelopes into which you can enter specific sums for specific expenses. Free and low cost envelope budgeting software are available that help users track expenses on their personal computers or on their mobile phones by placing allocated sums into virtual envelopes and assisting you in keeping track of how much money you have spent in each envelope category.
This money management technique will help students and young adults who are learning to budget money for the first time to effectively manage money and spend money within their means.