How does the envelope system work?

Mags30

From reading various debt free diaries on here I've noticed that a lot of people are using an envelope system to organize money. I'd love a more detailed description of how this works if anyone can help. It seems to be a really good idea:)

How many envelopes do people use?

If you meet a friend for coffee or get a takeaway is that from the food envelope or a social fund/treats envelope?

dancingfairy

I guess it's about finding what works best for you. At the end of the day you have the amount of envelopes you feel you need. Personally I would count coffees out/takeaways as luxuries so would take them out of the social envelope.
I've never used the system myself so may not be the best person to answer but hopefully it will bump your post up and you'll get some more replies.
df

fatbelly

Hi

The only resources I know of (must be some others out there surely) are produced by Stewardship. There is a video (Maria's story) where she explains the system.

http://www.stewardship.org.uk/money/smartweb/resources/embed/84

It's 11 minutes long and I wish they had not stood her in front of that backdrop but Maria herself is very watchable and her story very moving.

There are some notes to go with it but I think you have to register (free) with them to view those.

kingfisherblue

My daughter uses envelopes to sort her wages and hopefully prevent her from going into debt. On payday (or over the following days), she withdraws all of her wages except £40 for her mobile phone - she's now talking of downgrading her package. It actually costs £36 a month. She only withdraws in £10 amounts, so if she has any extra, that also stays in her account.

She then pays me her board. She puts the rest of the money into envelopes:

£40 a week spend (this is reduced if she doesn't earn enough - she works for an agency) - so there are four or five envelopes, depending on whether it is a four week month or a five week month.

£20 council tax - it isn't as much as this, but as it varies (due to wage varying), it is better to have too much than too little.

£55 monthly travel ticket

Anything left over is given to me to put into her credit union account. Occasionally she will buy some clothes before putting money into her savings, but always sets a limit beforehand.

If she goes for a coffee, has a takeaway, or anything similar, it comes out of her weekly spends. She is the only person in the family to drink Diet Coke, so she has to buy this herself as well - if I get any with the shopping, she pays me back out of her spends. Ditto magazines if she wants one.

She's hoping to get a house with her boyfriend in a couple of years. She knows that they can't afford it yet. Already, thoguh, she has said that she will use the envelope system to help her budget.

Mags30

@fatbelly Thanks for the video, I've just watched all of it. So it's only 1 envelope with lots of plastic money bags inside and you can borrow from one envelope to another.

I was rather amused that this topic even has a video, I assumed it was too simple to require a video:D

@kingfisherblue Thanks for the info. £40 does seem like a good amount for weekly spends. I might try that reducing it some weeks when I can't afford treats. I love Diet coke too!

Buffythedebtslayer

I have three pencil cases - driving lessons, spending, shopping,

Everything else is by DD from my Bank account (pets, presents, travel,rent, loan CC)


xxxx

Mags30

I was under the impression that there were far more enveloples.

• Food
• Petrol
• Social outings
• Clothes/cosmetics
• Holidays
• Christmas

I could go on....

But if those were my categories and I bought a book...it's so simple but kind of complicated when you start trying to make everything fit into a category.

I think I need a mystery shopping envelope too because I have to buy test purchases which I wouldn't be buying otherwise. But then the test purchase might be a coffee and sandwich so should that be taken from the food envelope because I would be eating anyway?

Help:D

kingfisherblue

If I used an envelope system, I would probably have to have a separate envelope just for books....

runmichellerun

I don't exactly have envelopes, but I use a similar system with my online banking as I'm able to set up savings accounts (effectively like an envelope) as well as have a current account. So I leave my direct debit's and weekly spends (which includes food) in my current account and then have the following savings accounts:

Car Savings (for MOT, Service, Tax, emergencies)
Holiday Savings
Presents Savings (for family and friends birthdays, as well as Christmas)
Haircut Savings

Anything I don't spend by the last day of the month before payday gets paid off my credit card.

However, as dancingfairy says, it needs to be a system that works specifically for you.

Mags30

runmichellerun wrote: »

Car Savings (for MOT, Service, Tax, emergencies)
Holiday Savings
Presents Savings (for family and friends birthdays, as well as Christmas)
Haircut Savings

I like those categories. They work for me. So I'd need those plus the everyday things like food and petrol.

@kingfisherblue I buy around one book a month so I suppose it could fit into the social/treats envelope. Where possible I use the Ammazon vouchers from surveys. You can have an envelope for books and I'll have one for clothes:)

Cheery_Daff

Hi Mags! Envelopes are great - but what you have as your envelopes depends on what you use!

I used to get paid fortnightly, and so based my budget around a four week month. That means that my monthly expenses had to be covered by two fortnightly pay cheques (which means I occasionally got a spare one! :j) I worked out what needed to be left in the bank each month, divided that by two, and when I got paid, transfered half of what I needed for montly bills to a separate account. Then I withdrew cash, and put into 'envelopes' (which started out as clear plastic bags, and ended up as little hand sewn pouch things - far more cheery!) I had envelopes for:

Food
unnecessary (anything sociable and cheery really - could spend on whatever I liked!)
Garden (was trying to establish a bit of a veggie garden, so put £10 a month in here for a while)
Slimming World (built up so I could pay in advance and get a week free - but I still put in that week, so ever 6 weeks I got an extra fiver)
Emergency (just put £5 a week in here)

That was it, but it worked for me! Now I'm paid monthly, so I divide each month into 5 weeks (meaning occasionally I get a spare week :j), transfer monthly bills, and then have a weekly cash amount I draw out. At the minute I just have 2 envelopes - food and unnecessary - and they get carried around with me in a kind of pencil case thing, in which I also have a purse with my cards in (sounds complicated, but it's not!). Means I don't spend the food money on unnecessary things, and then have none left for food! I now keep the emergency fund in the bank (still only £25 a month, but it's slowly mounting up!), and at the minute the garden gets funded from the unnecessary budget as it's a bit more up and running and doesn't need much input.

Hope that helps. Also remembered a blog post from a woman who writes about simple/frugal living, which explains about the envelope thing well - she's also good on tips for budgeting!

Cheery envelope blog post

Hope that helps! :j