• Easy Envelope Budgeting for Beginners


    In this day and age everyone is talking about budgets. I hear the chatter everywhere I go, “Do you have one”, “I’m going to start one”, “what’s the best one”, “I can never follow one” and on and on. What I’ve found is that people genuinely want to find a budget that works for them and their family and stick with it. Sounds pretty easy, right?

    This first time beginner’s budget system was passed onto me by my mother, shortly after I moved out on my own more than twenty years ago. She called it the "Envelope system". Whether or not is has an official name, I couldn’t tell you. The system is fantastic when you can't afford one of those expensive accounting ledgers or an accountant or financial planner to walk you through the baby steps of getting it all together.

    Start by taking a clean sheet of paper and dividing it into 3 equal columns. At the top of each column, write the following:


    1. Monthly Expenses
    2. Yearly Expenses
    3. Income Sources- This amount is your total monthly income from all sources. Write each source down, add them up and then divide them by 4.

    Next, under each column list all the expenses that you have. For instance, It may look something like This:


    Monthly Expenses ÷ 4
    Yearly Expenses ÷ 52 weeks
    Monthly Income Total
    Rent $400 ÷ 4 = $100. week
    Phone $60 ÷ 4 = $15. week
    Utilities $100 ÷ 4 = $25. week
    Groceries $200 ÷ 4 =$50 wk
    Renters Ins. $350÷ 52 = $6.75 wk
    Car Ins. $1200 ÷ 52 = $24. week
    My Paycheck for the Month = $1200.
    Take your monthly income and divide by 4. This is how much you have to put towards each weeks bills.
    Total Weekly Amount $190. Total Weekly Amount $30.75 Total Wkly Amt $300.

    Once you have completed you list of expenses and income, add your Total Weekly amounts together, in this sample the total weekly expense amount would be $220.75.

    The total income for 1 week is $300, thereby creating a surplus of $79.25 which can be used to pay back debts, or savings accounts, IRA’s etc. Be sure to pay yourself an “allowance” each week. Sometimes it’s as little as $10 but this necessary expense helps reward your work and keep you on track.

    Take an Envelope for each Expense and write the name of the expense across it, along with the weekly dollar amount needed to pay that particular bill. For instance, in this case you would have 6 envelopes labeled Rent $100 week, Phone $15 weekly, Utilities $25 weekly, Renter's Insurance, Car insurance, etc.

    At the end of each week, cash your paycheck and “Pay” each envelope the amount needed to pay the bill. If your bill comes in slightly less one month, leave that dollar amount as a cushion for another month. On another note, if you suddenly discover that your monthly income is less than your expenses, it’s time to take a look at your expenditures, nipping and tucking where necessary.

    If you have struggled in the past, paid your bills with credit cards, only to sink further into debt, then this basic budget plan is a step in the right direction. Oftentimes people can manage a monthly budget until a yearly expense creeps up on them, such as property taxes or Homeowners insurance, only to send them in a whirlwind, robbing Peter to pay Paul.

    This method of budgeting helps prevent that panic.


    ©1998 Melissa 'Liss' Burnell – Creator & Designer of Budget101.com, “Digging yourself out of debt when all you have is a spoon”

    © Can Stock Photo Inc. / lobzik

    Comments 21 Comments
    1. goetergirl's Avatar
      goetergirl -
      I like this idea for budgeting. It seems fairly simple and straight forward.
    1. Acorns-2-Oaks's Avatar
      Acorns-2-Oaks -
      Your mother was very smart. I've been telling my kids this since they were young but I never thought to spell it out this way. Thanks!
    1. CrazyMomof7's Avatar
      CrazyMomof7 -
      I really like this budgeting idea. I will need to pass this on to my kids. Thanks!
    1. happy0349's Avatar
      happy0349 -
      Practical Budgeting Tips to Manage Your Money Better.
      Thanks
    1. linda baity's Avatar
      linda baity -
      I have actually tried this but without the envelopes,maybe i needed the envelopes.
    1. Ketsyc's Avatar
      Ketsyc -
      Liss, where can I get a copy of the book “Digging yourself out of debt when all you have is a spoon”? This is exactly where we are. And the envelope system is exactly what i plan to do. I just hadn't heard how to do it right. Now i know. Thanks
    1. FreebieQueen's Avatar
      FreebieQueen -
      Quote Originally Posted by Ketsyc View Post
      Liss, where can I get a copy of the book “Digging yourself out of debt when all you have is a spoon”? This is exactly where we are. And the envelope system is exactly what i plan to do. I just hadn't heard how to do it right. Now i know. Thanks
      Our original eBook is How to feed a family of 4 for less than $200 a Month. Please keep in mind it was written over a decade ago:

      Budget101.com - - How to Feed a Family of 4 for less than $200 Month

      our Latest eBook is "The 2012 Family Guide to Groceries under $250 a Month" and it's available here:

      Amazon.com: 2012 Family Guide to Groceries under $250 a Month eBook: Melissa 'Liss' Burnell, Budget101.com: Kindle Store
    1. Faayth's Avatar
      Faayth -
      How do you adapt the envelope system when you rarely handle cash?

      My husband's paycheck is direct-deposited, all our bills are auto-deducted, I transfer money from account to account via my bank's website...even when we go out for a latte, it's done with a debit card. I don't think we have a checkbook, even, and the last time I handled cash was when my six year old lost a tooth.
    1. Juicyfruit1004's Avatar
      Juicyfruit1004 -
      Quote Originally Posted by Faayth View Post
      How do you adapt the envelope system when you rarely handle cash?

      My husband's paycheck is direct-deposited, all our bills are auto-deducted, I transfer money from account to account via my bank's website...even when we go out for a latte, it's done with a debit card. I don't think we have a checkbook, even, and the last time I handled cash was when my six year old lost a tooth.
      My husband is the same way.
    1. Swanmom6's Avatar
      Swanmom6 -
      What a great idea, going to have to use this method.
    1. weezie's Avatar
      weezie -
      I have been using this budget for the past 4 months... works great for me
    1. thesparro's Avatar
      thesparro -
      I am going to have to try this. I am awful at saving and we really need to start saving for a car.
    1. Hawkvet's Avatar
      Hawkvet -
      Gonna give this a try. I need simple and this sounds simple.
    1. weezie's Avatar
      weezie -
      Quote Originally Posted by Juicyfruit1004 View Post
      My husband is the same way.
      if you pay yourself weekly -withdraw cash weekly $10-$20- you wont have to use your debit card to pay for your latte, also withdraw the cash to pay for your groceries.. at the end of the month any extra money left in the checking account can be moved to your savings account. or applied to a bill
    1. Nonnie0105's Avatar
      Nonnie0105 -
      I have just started the envelope system. It takes some getting use to and takes a couple of trials to get the categories you need.
    1. mydartha1's Avatar
      mydartha1 -
      Our family started budgeting about three months ago now, but I like this approach as I have it on a spreadsheet, always having to go in and change amounts in the accounts. I think this approach will help me greatly.
    1. littlebit061's Avatar
      littlebit061 -
      I will have try this budget with my family
    1. jandenno's Avatar
      jandenno -
      Going to start in the am will get the numbers tonight!
    1. Jennyo's Avatar
      Jennyo -
      Quote Originally Posted by Juicyfruit1004 View Post
      My husband is the same way.
      Hey my hubby also gets direct deposit, we just have a certsin amounttaken out each week and sent to the proper places. Like $70 for car a week, 20$ per week for electric n stuff 50$ week .
    1. GoodLife's Avatar
      GoodLife -
      Learn to use Microsoft Excel if you have it, it scares a lot of people, but once you learn it you'll appreciate what it can do for budgeting. My spreadsheet allows me to enter incoming (paychecks) and outgoing expenses. It is just like the envelope system (this is where I cut my budgeting teeth when I started) I know how much each paycheck I need to transfer out of checking and into savings for those bills that are due every few months. When the bigger bills are due, I transfer the funds back to checking and write a check.

      Quote Originally Posted by Faayth View Post
      How do you adapt the envelope system when you rarely handle cash?

      My husband's paycheck is direct-deposited, all our bills are auto-deducted, I transfer money from account to account via my bank's website...even when we go out for a latte, it's done with a debit card. I don't think we have a checkbook, even, and the last time I handled cash was when my six year old lost a tooth.
      Determine what your spend is per pay period. Not your wants, your needs. Big difference. Withdraw that much each pay period, throw in another 10 or 20 dollars for discretionary "wants". That's still spending about $1200 a year on short term happiness. Using a debit card makes it too easy to keep swiping. A latte, is that a want or a need? The thrill of that latte is gone once you've taken your last sip. But you've spent the money. Your wants are what what kill a budget. This is what you have to control. When you travel with cash in your pocket, you're less likely to spend it because you know you only have XX days until you have more cash. Four years ago I lost my husband, our income was cut in half. I had to figure out how to keep us going. Two years later, he passed away, so I was once again financially cut in half because social security will only pay for one of now. It's only when crunch time comes that you truly cut your expenses to the bone. I'm doing ok, but only because I recognize the difference between needs and wants. Only when you truly track your spending will you be able to control it. To me, it's fun.


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