How do you manage your monthly budget?
Rent and gym membership fees are fixed, so you won’t be over budget. You can also predict the monthly amount of gasoline for a commuter car.
It is dangerous to budget only fixed costs
However, it is dangerous to be relieved if you can manage your budget by looking only at these fixed costs. This is because you can spend money unexpectedly and your budget can go crazy in a blink of an eye.
I should have decided to pay $ 50 for clothes this month, so why are there so many H & M paper bags?
It is proof that you have made a purchase that exceeds your budget.
My friend’s birthday dinner was supposed to be modest, but someone ordered a bottle of wine and three appetizers and said, “Let’s split the bill together,” so it was over budget.
If your budget goes wrong, you’ll have to think through the cause, adjust your budget for the next month, and try again.
The good thing about a living budget is that you can respond flexibly to reality in this way.
But if you want to be a little more disciplined, it may seem old-fashioned, but let’s manage your budget by subdividing cash and putting it in an envelope.
This system that uses envelopes, which my mother practiced in the 90’s, is a budget management system popularized by Dave Ramsey, who is said to be a financial expert.
I don’t agree with everything Ramsey says, but some of his spending management tactics are supportive.
What is a budget management system that uses envelopes?
The first step in a system that manages cash in envelopes is to keep track of your monthly budget.
Decide what to allocate and how much to live. Others are not helpful. Because this is your budget. No matter how you decide, it’s not a mistake.
Next, decide which categories you want to track your spending on and which you want to keep your spending down.
Are you having trouble paying your credit card because you’ve been shopping too much online or spending generously on vacation? In this case, such expenses are applicable.
The categories in which it is generally better to switch to a system that manages cash in envelopes are ” food expenses “, ” gift expenses “, ” entertainment expenses “, and ” dining expenses “.
At the beginning of the month, determine the amount for each category and put the cash in the envelope for each category.
If you run out of cash in the envelope, that’s it. Don’t push it. It is a foul to withdraw cash at an ATM or withdraw money from another envelope.
Anyway, that’s the end of the month. Wait until the calendar is in the new month before refilling the envelopes with cash.
Ramsey sells a variety of cash management products, but they are quite expensive, so you don’t have to buy them. I think you can write the category name on the front of an ordinary old envelope and use it.
Write the amount on an envelope or put a receipt in an envelope each time you buy something.
But when I go out, I don’t carry a lot of money with the envelope. How much you carry depends on your budget.
Also, if you don’t like putting cash in and out of envelopes every day because it’s eye-catching, bundle the banknotes in your wallet with clips for each category, and attach a note with the category name for each bundle. Let’s go.
Here are some practical examples.
One night, I’m going to the movies and carry an envelope or clip of banknotes that says “Entertainment.” Speaking of movies, popcorn, isn’t it?
But if you can’t get popcorn for free with MoviePass, bring a snack from home. In this way, managing your spending with envelopes will prevent you from spending extra.
The place where you feel pain in your heart when you pay with cash is miso
When I meet a friend at the bar, I’m worried about being late and usually arrive first.
And when my friend arrived when I drank about half a glass of wine, I was feeling tipsy at that point, and I told my friend who was trying to order a drink, “Keep it on my slip.” I will tell you.
After that, we will enjoy happy hour together for 3 hours and pay $ 34 to go home.
But at the end of the month, the total amount of happy hour spent makes me feel happy.
So I decided to change the way.
When I go out, I take out only $ 20 from the envelope that says, “Bar and Restaurant” and leave the rest at home.
Every time I order a drink and receive it from the bartender, I ask for the price, give me cash, and get a change.
This way you will always know how much money you have left for the night.
Envelope-based budget management systems work because they are painful when you actually hand cash to a cashier.
It doesn’t stop you from shopping at all but having to hand over cash and pay for it is a deterrent to impulse purchases.
Everyone wants to avoid emptying envelopes, even though there are still many days until the end of the month.
Blind spot is online shopping
Meal delivery, automatic regular delivery of dog food, and cheap pants to buy on eBay. All are purchased online and paid by credit card.
There are many reasons why credit cards are better than cash. In the first place, you cannot use cash when shopping on the Internet.
Therefore, a budget management system that uses envelopes may be unsuitable for some people.
Alternatively, you may want to use it only in specific categories such as fashionable and expensive coffee, foliage plants, sneakers, and garage sales that you buy at Starbucks.
If you can reduce impulse purchases by simply unsubscribing from popular online shop promotional emails, managing your cash in envelopes can save you even more.
The advantage of a system that manages cash with envelopes is that you must be aware of where and how you spend your money. Somehow you don’t have to spend money, so you can prevent wasting money.
The initial investment only costs you to buy a few envelopes, and you can save on envelope costs by reusing used envelopes.
