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.