Saving money can be difficult and almost feel impossible sometimes. You have bills to pay, emergencies to tend to and everyday life to live that requires multiple expenses. A lot of people even live paycheck to paycheck and never think they’ll be able to save money.
It’s normal to feel bogged down by money concerns but that doesn’t mean you have to stay stuck. There are methods that you can try if you’re looking to start saving up money for any reason. Keep reading if you’d like to learn about how to use the envelope system to save money.
What Is the Envelope System?
The envelope system is a budgeting method created by financial literacy teacher, Dave Ramsey, that allows you to save and separate your money for different things. It’s very practical and can be used with any amount that you have available to put towards it.
The best part about the cash envelope system is that it’s a huge visual reminder of your goal to save money. Anytime you add or subject dollars to or from the envelopes, you can see what’s being put in or what is left over.
How to Use the Envelope System
The envelope system is super easy to get started with. You don’t technically have to use any money because it’s a saving system.
The first thing you want to do is go over your budget to separate all the expenses. For example, you can write down everything you need to pay for during the month and how much each item will cost you.
Once you have your monthly costs all laid out, you can begin making the envelopes for each of them. Take as many envelopes as you would need and write each expense on its own envelope. For instance, if you need R100 for the phone bill and R200 for cable, you would write “cable” on one envelope and “phone” on the other.
When you have the money for each bill, whether from your paycheck or another source of income, take the R100 for the phone bill and the R200 for cable bill and put them in the envelopes right away. Or you could take R50 for the phone bill and R100 for the cable bill if it’s your first check of the month. You would add the other halves of the money to the envelope from the second check.
Getting Budgeting Right
So how do you know what expenses need envelopes and which don’t? Well, the rule of thumb is all of them do. The last thing you want to do is miss out on a bill because you didn’t account for it or thought that you could just wing it.
The best thing to do is to keep everything in an organized structure. Starting the envelope system is a huge leap towards getting your finances in shape. But you should monitor where you are first and the only way to do that is to do a thorough breakdown of your budget.
Start by making a list of all the items you pay for monthly. Then, make a list of all the necessities (i.e. food, rent, electricity). Keep necessities to the bare minimum and be honest with yourself about the things you actually need to survive!
Then make a list of the bills that are more for your entertainment and enjoyment, such as Netflix, personal shopping budgets and eating out. Try to cut out as many extracurricular expenses as you can so you can focus more on saving.
Saving With the Envelope System
You can use the envelope system to save in the same way that you use it for bills. If you’d like to save up for a new car or to invest in some camera equipment, add those envelopes in for monthly budget.
Let’s say the new car you want is R150,000. You could divide this number by how many months you think it would take for you to get all the money for the car. Then, you’d label an envelope “new car” or whatever you’d like to fit that car saving goal.
If you were saving for the car for 12 months, it would be around R12,480 month. If you get paid bi-weekly, you would take R6,240 from each check and put it in the car saving envelope. Each goal will more than likely have it’s own due dates and specifics but you can adjust saving details accordingly with this simple system.
Stay Committed to Your Goals
The envelope system is a great way to hit your goals and start to see exceptional growth in your savings and financial structure. However, if you don’t stay focused and committed to your goals then you won’t get to far.
It can be easy to skip a week or two and may seem harmless at first but ultimately you’ll do more damage in the long run. Readjust your budget as much as you need to make sure your goals and necessities can always exist in the same space.
Also, consider ways of bringing in extra income if you feel like you want to hit saving goals even faster. You can use your natural talents or skills that you’ve acquired and developed over the years to land you some extra cash weekly or monthly. Think out of the box and don’t doubt your abilities to make money on your own!
Want to Learn More About the Envelope Systems and Other Proven Methods for Saving?
Congratulations on taking a great step towards financial literacy and freedom. Using the envelope system might seem like a small task that you do weekly or monthly, but it can equate to big payoffs. You will see your money grow more and more with each deposit you make.
Having a saving system is important yet there are other aspects to personal finances to consider as well, such as paying debt and building credit. Putting all of these areas together will create a balance in your money management and help to create long-lasting wealth. Check out this blog for more help on mastering your financial life.