Monday, September 19, 2011

Using Envelope System!


Have you ever used the "envelope system" as an effective means to prepare your monthly budget? I do! I've been doing it for years and so far, it's proven effective. What I did was I bought a pack of small envelopes from a local book store, then I made a list of our projected monthly expenses. I labeled each envelope with the corresponding budget allocation like electric bills, water bills, telephone bills, internet bills, etc. I also have envelopes for food allowance, grocery allowance, kids school allowances and for house helper monthly salary. I also set aside an envelope each for savings, emergency fund, leisure fund. As soon as the monthly income comes at hand, I would normally put the money on it's designated envelope starting from savings envelope and so on. Since some of our utility bills do not have a fixed rate, as it depends on our monthly consumption, what I'm doing is that I just allocate an amount equivalent to our average monthly bill for each category. When the bill arrives, I would check on the amount and if it falls below the amount kept in the envelope, I would get the "difference" and transfer it into the "emergency fund" envelope. Same with other projected monthly expenses. Sometimes, I just play with the budget. Whatever is in excess of the monthly payables, I would either put it onto the "emergency fund", "leisure fund" and "savings". At the end of the month, I would check all the envelopes and if the "leisure fund" was not utilized in full, I would transfer it to the "savings" envelope. The "emergency fund" accumulates every month and this is where we get the unexpected payables such as school contributions and other expenses. This is also where we get the money for covering up those appropriated budget which exceeds the limit set. For example, if I allocate P2K for electric bill and our bill for the month reached P2.3K, the difference of P300 will be taken from the emergency fund envelope. Upon reaching the desired amount, the contents of the "savings" envelope will then be transferred to the bank account.

By doing this technique, I do not mess up with my monthly budget and it brings me a great pleasure whenever I'm able to put an extra money to my "emergency fund", "savings" and "leisure fund" envelopes. Somehow it works for me. I'm also beginning to train my kids on this system and let them work on their monthly allowance. I'm happy that I can see their eagerness to save as they watch their money grows.

17 comments:

  1. Hi Krizza. This is such a good idea. I think I'm going to take your advice.

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  2. Thanks Teecup! Yeah, please try it. It works for me. It might work for you too.

    Thanks for the visit! :)

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  3. I want to try this trick, let's see if it is effective for me lol. Thanks for sharing this Krizza.

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  4. You're welcome Kat! It's effective but just make sure to follow it with "discipline"...u know what I mean :) Try it! Thanks for the visit!

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  5. Hi Krizza, great share. I didn't think that this would be a nice strategy to save money for bills. But If I have too many bills to pay, that means I will have many envelops. I usually keep my savings in the bank, and the coins in my cabinet.

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  6. this is a nice system for budgeting...well organized ka talaga ha

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  7. @ San Antonio Auto Accidents : Thanks. Different strategies apply to different people. It actually depends on your lifestyle. I guess this normally works for home makers. :)

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  8. Yes Reese! It pays to be organized. It will bring you into great heights... :) Glad you're okay!

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  9. I used to do envelop system before but then Bella came and I can't seem to organize everything.

    Thanks for this post krizz it reminds me to revisit my envelopes and put them to good use again...

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  10. Thanks Rovie! :) Hope u can do it again...

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  11. I haven't tried this system but have heard about it. The reason why I haven't is that most of the time, we use plastic money in our expenses. So, when the bill comes, it is all in one statement. I just allocate enough budget so that we can pay the whole amount when the bill comes so that there won't be any interest. We normally don't buy/use credit when we can't pay for it in full when due.

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  12. I have an on/off relationship with this envelope system, LOL. I've been doing it for quite sometime but then, there are times when I find it difficult to sustain it. Thanks for your post, it inspired me to start doing it again. :-)

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  13. this is very inspiring system you have, thanks for the tips

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  14. This is a nice idea but there are times that I have more envelopes than the money to put into it.

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  15. Hi Chin! Glad to see u back here. As I said, different strategies apply to different people. It's a matter of choice and what u think best suits u at the moment. Thanks for the visit!

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  16. @ Pearl, Thanks...hope u can give it a try again.

    @ Silvergirl, Thanks a lot. I'm glad u appreciate the system.

    @ mannoy, we have to live within our means and spend only based from what we earn. So your envelopes won't exceed your income generated. Thanks for the nice comments and input! :)

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  17. thanks for the tips :) me and my husband do have an envelope system but it's primarily for money that we save for our parents and sibs ^^

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