Tuesday 19 May 2015

Our Finances Suck Part 2 - Envelope System



Years ago in an attempt to lose weight and gain fitness I bought a treadmill.....great idea! Hubby set it up for me  in the corner of the lounge room...but you know what......I lost no weight and gained no fitness....seems you actually have to use the thing to get results...haha who knew!

So that's where we are at with our budgets people!  We have to use it and stick to it!!

Last week I updated my old Excel spreadsheet budget, eventually got my income and expenses to balance after a lot of adjusting and re-adjusting and now it is time to work out how to use the budget and how to make it work for me.

I went through my budget and highlighted the payments as per the following....

DIRECT DEBIT.....these included our mortgage, life insurance, health insurance, home and contents insurance.  

BPAY.....these included electricity, water and land rates {works best for me to make payments to these each fortnight rather than freak out when I receive a huge bill!!} as well as our credit card and school fees.  

CASH......these were groceries, clothes/shoes, doctor/chemist, birthdays, petrol, sewing lessons, art classes, maths tutor





So each fortnight when our pay goes into the bank I am going to sit down and make all of the bpay payments for the amount indicated on our budget. Next I am going to go to the bank and withdraw the total amount of the cash payments {it is a good idea to ask the teller for a good mix of small notes for this...I'll explain why in a minute} and lastly I should be left with the correct amount in our account to cover all of the direct debit payments....I did say 'should'!!


To manage that cash that I have withdrawn I am implementing the "Envelope System'...basically I will have an envelope for each cash category...so one for groceries, one for doctor/chemist, one for birthdays etc..  and I will put the allocated dollar amount into each envelope for the fortnight {hence the reason it is advisable to get a good mix of notes from the teller when you withdraw your money}.  






The theory then is that once you spend the money from that envelope then there is no more, conversely if you have money left in an envelope at the end of the fortnight you can choose to put that away as savings or leave it in the particular envelope for later use.

The envelope system can get a bit messy sometimes...like if you only have your grocery envelope with you but you make a purchase at the chemist....then you have to repay your grocery envelope from your chemist envelope when you get home...or if you are tempted to steal from your clothes envelope because you have already exhausted your takeaway budget......hmm have I lost you yet!!

But for me I could see that it could work... .I'll know that I have the money for the maths tutor and the girls after school activities sorted each fortnight, I will have money set aside for clothes and birthdays which can accrue when not spent and I will have to live within the envelope budget for groceries ....which is way hard to do when you live so close to a shopping centre that you sometimes feel like you spend more time there than at home!!

I realize that the envelope system may not be for everyone and of course there are other ways that you can manage your money once you have your budget in place.....you could use bank accounts instead of the envelopes or a debit card rather than carry cash or use a credit card as long as you repay in full before interest is charged etc..

Whatever system you choose to use is fine as long as we are sticking to our budget each fortnight!

Linking up with Essentially Jess for #IBOT



Do you have any great tips on how you manage the money day to day...whether it be via bank accounts, debit card, envelopes?  




14 comments:

  1. The envelope system worked a treat for us for many years. Now days I have a few accounts to house the various bits and pieces I require.

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    1. Glad to hear that it worked well for you Nicole...gives me added motivation!

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  2. I should use the envelope system, I kind of do it in my head. Then I see a sale and it all goes pear shaped. Cheese on toast covers 5 food groups right?!!

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    1. bahahaha Jo!! Things go bad when I do it in my head too!!! Pretty sure cheese on toast is right up there on nutrition ;-)

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  3. I can't even imagine having the discipline to make this work! I hope it works for you! We are on a big savings year this year and I'm sticking to my weekly allowance pretty well. It's such hard work!! x

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    1. Sounds like you are doing well with your savings Bron!
      It is hard work that's for sure!

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  4. I have used the envelope system before and it worked really well! I actually worked out exactly what notes I needed and gave the teller my little list each week haha. I might have to think about starting it again, it was quite a success and I can't remember why I stopped!

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    1. I think I'll have to adopt that tip Lisa with the list of notes for the teller!! Glad it worked for you...gives me encouragement to give it a go!

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  5. I've got your beat on the exercise machine. Mine is sitting in the garage for a box...it's been several months! I love the envelope system...when I use it. You've inspired me to be for consistent.

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    1. Haha glad I'm not the only one with the exercise equipment lol !! Good luck with your consistency and I'm glad the system works for you....makes me think I can do it too!!!

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  6. I use folders but the trick is remembering to file the bills - and write in the diary when they need paying. Direct debit is fine as long as you have money in the bank to cover the bills at the time!

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    1. Yes remembering when things are due can be tricky! I try to avoid direct debit where I can for that very reason....easier for me to make a payment when I know the money will be there!

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  7. I use folders but the trick is remembering to file the bills - and write in the diary when they need paying. Direct debit is fine as long as you have money in the bank to cover the bills at the time!

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  8. Wow. So impressed with this discipline. I'd be a complete failure. Look fwd to am update to see how you are going with it. Xx

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