Are you having a hard time budgeting? Regardless of the amount you are receiving each month, it is essential to manage your budget. There are different ways of managing your finances and budgeting. One method is through envelope budgeting, which the GuardianWealth budget planner app uses to help you better manage and keep track of your expenses. Don’t worry, you don’t need to buy physical envelopes — GuardianWealth has created an online version. As the name implies, you will separate cash in various envelopes and allocate money to each one. You will use the funds inside the envelopes for paying regular bills, utilities, mortgages, and other expenses.
You are accountable for maintaining the expenses of you and your family. So if you’re running out of cash for your expenses, you might not be managing your budget properly.
Envelope budgeting helps you control spending your cash to avoid running out of money for specific expenses. This method will also help you divide your actual income into different categories of expenses. And then use only what is inside the envelope to meet those financial needs.
If you want to try this method of budgeting, the first thing to do is understand your variable vs. fixed expenses.
Fixed expenses are the ones you must pay each month. Fixed expenses include monthly bills for utilities, insurance, and mortgages. You have very limited control over fixed expenses.
Variable expenses are expenses you can control on a monthly basis such as groceries, eating out, and shopping.
The first thing to do if you want to start envelope budgeting is to assess your present expenses. This means reviewing how much you spend, and on what. Identify the fixed costs and the variable ones. Regularly tracking your expenses will make the process easier.
Determine your net income after paying your obligations like taxes. Then deduct the fixed expenses from that amount. The next step is to determine the actual amount of money you need to save in each envelope category.
After evaluating your current expenses, the next step is to create categories and decide how much to put aside for each one. Common expenses include household items, groceries, clothing, gas, dining out, allowances, savings, insurances, and taxes.
To determine the right amount for each category, a good place to start is your historical expenses.
GuardianWealth’s personal finance app makes this process simple and quick, as it can automatically categorize your expenses and export them into a budget planner tool. This will help you decide where to cut costs going forward.
Label the envelopes and write out the monthly budget for each one. This will help you know how much to spend on each category every month. The good thing about setting a budget is that you will know if you’re overspending. GuardianWealth prevents you from overspending by sending you alerts when you have hit 90% of your budget on a category.
Try as much as possible to restrict your spending to your budget, modifying your spending habits if you find yourself overspending in any area. You can change or adjust your budget according to your expenses each cycle. However, you may have an unexpected expense which could torpedo your budget. This is why it’s important to have an emergency fund. If there is extra money left after the month ends, start saving in an emergency fund. A good rule to follow in budgeting is the 50-30-20 rule.
The envelope budgeting method is ideal for excessive spenders and budgeting beginners. It also keeps you on track with how you save and spend your money. The envelope budgeting method is ideal to manage personal finances.
If you want to have a smooth budgeting process, try the envelope method. It also works efficiently without overspending your cash. Using this method of budgeting offers many benefits:
Other tips for using the envelope budgeting method include:
You may think of allotting an envelope to buying clothes, for example. But if after a few months you never use the cash from this envelope, transfer it to other categories. Put more funds into the category that requires weekly purchases like household goods.
Schedule your budget based on how often you receive your salary.
To protect your funds, make a plan or write a list of things you need before shopping. This practice will help you estimate the cost of the trip and determine if you have enough money in the envelope. Stick to your budget to avoid running out of money.
When using the envelope budgeting method, it is essential to re-evaluate the budget regularly. You will notice your spending for a certain category changes every month. If you think that the allocated amount is more than enough for a category, try to adjust it. Put the excess funds aside for other financial goals. You may also opt to create new categories.
As mentioned above, the envelope method makes tracking spending a lot easier. But it requires discipline and some compromises. Stick to your budget for each category. The GuardianWealth personal finance app uses the envelope method to help you budget. You can also view how your spending has improved over time and celebrate your wins.
The best thing about envelope budgeting is that it improves the spending habits of an individual. This method of budgeting is another way to achieve your savings goal and keep on track with your budget.
If you notice you’re struggling financially, the envelope budgeting system can save you. The traditional envelope method of using physical envelopes and only spending cash may make this process seem cumbersome. However, with the GuardianWealth budget planner, this process is simple, and it will change the way you manage your money.
The envelope budgeting method will teach you to be financially responsible. Knowing that there is a finite amount of cash in the envelope, you will only spend money as needed. This way you can avoid running out of money for you and your family’s needs.