Wednesday, January 4, 2012

Household Budgeting Techniqes: The Envelope Savings Method

This year I've vowed to keep track of every cent I spend. I'm using Google Documents like I did last year for the ease and accessibility, but I'm taking it one step further with the envelope budgeting method.

The pedantic organizer buried somewhere deep within me was enchanted when I read about the envelope savings method on a favorite blog, Just Hungry. I wouldn't be able to read a kakeibo (detailed Japanese budget planner that I'd love to try), but cute envelopes for budgeting are simple enough to use!

I've always been good at budgeting and saving, so I had to take this a step further to make it challenging. All of my budgets are very low! Here's what I've set for the month of January:

Groceries: $80 (amount left, $55.80)
Car's Gas: $40 (amount left, $40.00)
Thrifting:  $25 (amount left, $9.00)
Fun Stuff: $20 (amount left, $10.60)

This is going to force me to seek out the cheapest spots for thrifting. I went to a thrift store's 50% off sale but even so I spent $14, eating up a lot of my budget. Looks like I'm sticking to flea markets and yard sales from now on!

Do you want to join in an try to envelope savings method, too? Here's the rules:

1. Never over the amount in the envelope.
2. Never switch cash from one envelope to the other.Once money is out, it's out!
3. Make it a game, try to carry over as much cash as possible to the next month!

Setting strict budgets like this makes you think outside the box for solutions to spend as little as possible. For instance, you might start carpooling to work to save gas money or packing lunch instead of eating out. Using cash only makes the money you spend more tangible than using your cash or debit card all the time.

What tools are you using to budget for the New Year?
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  1. Love your pink bunny envelopes! Your thrifting envelope is pretty low for only being the 4th of the month- You got some lean shopping ahead! I notice you have no rent/mortgage envelope there...

  2. Where did you find those adorable envelopes?

  3. I have a friend that uses this and she has been very successful with her envelope system. Best wishes!

  4. There is a financial planner that I listen to on the radio all of the time who advises using the envelope method. He swears by it.

  5. Cute Envelopes! The envelopes system never looked so good.

    I too do all my budgeting/accounting via google docs so everything is available where ever I am, but I've been contemplating a cash only/envelope month long challenge. I think using cash is going to make it a lot more tangible to me.

    So are those your numbers for the rest of the MONTH? Or the week? If its a month, then wowza girl! You are living on a shoestring.

  6. Lori: My rent is paid in full for a year, so my envelope is empty...for now.

    Anonymous: I got them from a 100-yen store in Japan :) Money envelopes are commonly used for gift-giving in Asia, you'd probably find some pretty ones at your local Asian food store.

  7. Rachael & Eartha Kitsch: I hear nothing but good things about it, I'm enjoying it thus far. It's easy to go over your budget with a debit/credit card, this makes what you spend so much more tangible.

  8. Dogs or Dollars: Yep, that's my budget for one month. I'm already a frugal person so it wouldn't be a challenge if I didn't set my budget super low.

    Looks like I'm stretching the hell out of $9 for my thrifting budget, ouch!

  9. Ouch indeed. I would be ok on all of the other categories except the thrifting budget. My brain does not compute a 25 bucks a month limit. Does not compute. :)

  10. Whoa! I guess you were really planning your escape from 'da man' for a while, getting the rent paid up like that! Good thinking! I tried the envelope system some 25 years ago with a long term BF who was outta control with his money. 1st month went well and he was all proud for having $$ left over. It all came crashing down month 2, he just couldn't handle it! *you should always have an extra envelope for 'emergencies', car repairs etc. that pop up. Even if its only 5-10$ a month, it will help when you need it! :) ...and I thought I lived on a tight budget!!

  11. I totally love this idea!!!! I'll have to try it ;)

  12. if you have money left over after a month, can you then transfer it to another envelope or do you just have more money to spend the next month? or do you throw that into a savings envelope?

  13. Beccalina: It won't be easy!

    Lori: Yep, I have been plotting my escape for some time now. I did consider that emergencies envelope, but I think if big car or medical troubles come up I'll just take that out of savings.

    I don't normally live on such a shoestring, but it's a fun challenge!

  14. Miss Lou: Try it, it'll be fun!

    Thrift Shopper for Peace: I'll be transferring my leftovers to the next month so I don't have to put as much cash in the envelope. If I keep a "savings" envelope around I'll be tempted to spend it. Likely on food ;) !

  15. When I lived on my own for the first time I was super poor and the envelope budgeting system got me through! I wish I could use a simple budgeting system like that now but with a husband and a daughter and mortgages and insurances and blah blah blah it's too complicated for the envelope system to be feasible. I do track everything I spend. I used to use google docs for that but I've pretty much switched over to dropbox.

  16. @little big

    My family uses a hybrid envelope method using Neobudget (they have a free version) and lately, actual cash for groceries and miscellaneous.

    I like the Neobudget envelopes more than a spreadsheet, and there are scary Red Numbers when you go over budget in an envelope!

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