Envelope budgeting and ways to use it
One of the most creative budgeting strategies I have ever tried was the envelope budgeting system. I have almost always worked a job where tips were at least half, if not all, of my income. It is much harder to budget bills when you are only bringing home a small portion of them every day. Envelope budgeting is a great tool no matter what way you get paid, though. I though I would share with you all how it works and my experience.
First off lets explain how it works.
You get a stack of envelopes and write on each one what bills you have, or maybe even something you are saving for. You can include things in you budget like gas, groceries or extra spending too if you would like. This is a very personalized system and can work in what ever way you need it too.
When I was working off tips I first came up with an average I brought home every day. Then, you want to look at the total of all the bills you have to pay and divide that up by an average of how many days you work. This should give you an amount to put in an envelope every day. The last part is easy. You’ll want to decide what shift are going to go towards what bills. As you work you just stick the already decided amount in the right envelope. You can decide to what to do if there’s anything extra. I always had an overflow envelope, that way if I was short a day I could pull what I needed from there.
Pretty simple right? This system can be implemented in tons of ways. I’ve done a few different ones myself.
Here are just a few examples.
- You can budget only you bills and keep whatever extra money you have in your wallet every day.
- Help budget all your spending. You can add/only do groceries, gas, wardrobe, baby supplies, etc. and that way you have that money ready when you need it.
- When I started doing hair I was getting a pay check as well as tips. My pay checks covered the bills. I then began envelope budgeting to pay off my debt with tip money. Certain days went towards certain debt. Weather it be a credit card, doctors/vet bills, or paying off a vehicle early.
- Those who are self employed and have to pay taxes quarterly may find this useful as well. Just put that money in an envelope and it is there when the time comes.
- One year we used the system for our taxes. We broke it down between money to spend on each of us, money to spend on the house, and money to put towards bills for a couple months.
- One of my favorite ways to use this system is as a glorified savings account. Make a few enveloped labeled with items off your wish list. Every time you get paid or have extra money slip a bit in one of the envelopes.
The most important thing about this system to remember is that once the money goes in you are not allowed to take it out. It can only be touched once the right amount is in there for what is intended. I put hole punches in my envelopes and placed them in my budget binder along with my bill calendar and bill/debt list.
Did this open your eyes to a new budgeting system?
This is a great tool for someone who struggles keeping up with what money goes where or has a hard time saving. If you’re trying to budget while working for tips this is a great tool as well! When pennies are tight it is great to know where everyone of them are going. Let me know what strategies you have for budgeting and if you’ve ever tried the envelope system! Happy budgeting!