How Budget Envelopes Can Help You Avoid Overspending

What are Budget Envelopes?

Many savvy consumers swear by budget envelopes. If you are concerned about the amount of money you spend and want to keep better track of your spending habits, budget envelopes might be the solution for you. It can be hard to really keep track of your money, but with budget envelopes you will have a very tangible way to visualize just how much money you have left over at the end of the month, if any.

Working With Your Envelopes

If you’ve determined that your monthly grocery budget should be $400, each week there will be $100 added to your grocery budget envelope. When you go to the grocery store, you will pay using the money contained in your “Grocery” envelope. When the money runs out, you can’t spend beyond that amount. If you find that you frequently run out of money, then you will need to determine ways for you to reduce your grocery bill. For example, you might be able to trim your grocery budget by not buying foods from the deli counter or by not buying prepackaged, frozen foods.

Unexpected Purchases

You may be asking what you should do about those totally unexpected purchases. Well, your goal is to keep them to a minimum. That could be quite a difficult task because a lot of purchases could slip into the miscellaneous category if you are not careful. This problem could be alleviated with the creation of a predetermined emergency list. This list should contain items like major car repairs, urgent and essential home repairs, and personal illness.

Several items may appear that not in your budget envelopes and not on your emergency list. Most likely these are items are very important, but not urgent. A good example of this would home improvement projects. Let’s say that new kitchen in your house is very important to you although this upgrade is not urgent. These types of purchases should not be placed on the emergency list; they should contain their own budget envelope to plan for this purchase. Eventually, you will have enough money in your budget envelope if you save over time for these discretionary but not urgent purchases.