How does the envelope system work?

angelaf_3

The Money Secret by Rob Parsons also describes how to do this and loads of other 'money secrets' if you can find a copy in your local library or you can buy it on line. It doesn't have to be envelopes it can be jars anything the principle is the same.
I remember my nan and my mother having tins which had a series of compartments, each with their own slit marked gas, rent, electric, etc which worked on the same principle.

Good idea to keep a spending diary for a month or two and then useing that and your bank/credit statements you should be able to work out what you need in each envelope.

Xevius

As a kid, I always remember my Mum doing this each time my Dad bought home his weekly cash pay packet. She would have a load of jam jars that she would put a weekly amount in for each household bill (most of which were paid either monthly, quarterly or yearly). I can't remember exactly, but I think there was one for TV license, one for electric/gas, one for water, one for the insurance man, one for the milk man, one for Christmas/birthdays, one for an emergency fund. My Dad got given his weekly spending money which would include the petrol money, and anything left went into Mum's purse to cover food shopping (which she always did the next day) and what was left had to cover everything else (ie clothes, entertainment, kids costs). She never ever paid a bill late and despite not having much income we always had money for anything we genuinely needed.

Maybe if I'd of taken more notice of my Mum I wouldn't be in debt now!

Mags30

Xevius wrote: »

As a kid, I always remember my Mum doing this each time my Dad bought home his weekly cash pay packet. She would have a load of jam jars that she would put a weekly amount in for each household bill (most of which were paid either monthly, quarterly or yearly). I can't remember exactly, but I think there was one for TV license, one for electric/gas, one for water, one for the insurance man, one for the milk man, one for Christmas/birthdays, one for an emergency fund. My Dad got given his weekly spending money which would include the petrol money, and anything left went into Mum's purse to cover food shopping (which she always did the next day) and what was left had to cover everything else (ie clothes, entertainment, kids costs). She never ever paid a bill late and despite not having much income we always had money for anything we genuinely needed.

I :heart2: this, thank you for posting it. It's a different world to paying with plastic and internet shopping. My bills are all direct debit so I wouldn't quite need that many jars but I do have some really pretty empty jars from the farmers market that were too nice to put in the recycling. I also have some pretty piggy banks lying around, maybe I should use those.

@Cheery Daff :coffee: That unnecessary category might work better for me (and most people) than trying to categorise everything. It sounds the same as the weekly spends described by @kingfisherblue.

I have no problem keeping track of my bills and mortgage payments, but they take most of my money all the time so whatever's left just gets used for what's needed. So one week it might be a tank of petrol, the next hairdresser or a present for someone. Any spare cash for the next two weeks is going to be used for car insurance....so apart from bills and mortgage there isn't a budget as such.

dorisday

ANY type of system like this works, be it envelopes, jam jars, tins etc, its a case of budgeting. Just about everyone was paid weekly and in cash years ago and if they knew how to budget this is what they did, if they didnt, bills sometimes didnt get paid. You have to live within yours means and that is only spending what money you make and not borrowing any.

Its a cold hard fact that borrowing money cost dearly 1st - interest can add a lot on and 2nd - if things go wrong and you end up having no job or a wage cut then problems begin.

If you make £50 a week only spend £40 a week and save the £10 left. Ok so you wont have the expensive clothes or run a car or a holiday etc but you will sleep at night and because you have saved a little of your wage it will begin to add up and you will be able to spend it someday on something you really think you want.

Moral of this story is LIVE WITHIN YOUR MEANS NO MATTER HOW MEAGRE it will make you a much happier human being. AND dont watch too much TV where they show you things that make you want to have, make you feel you should have and cant live without. We all dont have the salaries of footballers/actresses/etc etc. But we can be happy with what we do have if we dont notice what we dont have if you get what I mean.:rotfl::rotfl:

Svenena

I use internet banking to do this. I started by doing an SOA, which included everything I have to pay for in a year, divided into monthly amounts (as this is how often I get paid). A couple of days after pay day, I have standing orders set up to deliver these amounts into different accounts. These are the account names:

Main (money comes in here, DDs and SOs go out of it - I never withdraw or spend on this)

Groceries (food, toiletries, cleaning products)
Entertainment (meals out come out of this, not the groceries one)

Car
Clothes
Holiday
Sundries (includes haircuts, presents, TV licence & medical)

The last 4 accounts get a 12th of annual budgeted amount the day after payday. Groceries and entertainment I prefer to budget for weekly, as it means if I run out of money I don't have to wait long for more to come in! So once I know how much I want to spend a month on each of these, I multiply it by 12 and then divide it by 52 to get a weekly amount, and pay that amount into each account from the main one by weekly SOs.

Any money left the day before payday can go towards debts/savings. I'd also recommend an emergency "envelope" if you don't have any savings (which you shouldn't if you have debts), so if your oven breaks down or something, you have some money ready.

My friends think this system is overkill, but it works for me, lol.

yellowpinky

Great thread!

I have envelopes for things that don't come around monthly, like my water bill which is quarterly, and the dentist - I just put a bit away each month for these.

Mags30

I'm going to try this when I get paid tomorrow but I still think it's complicated. What if I buy wine and a newspaper in Tesco with my food? I'm thinking I'd need an awful lot of change for transferring the exact amounts from one envelope to the other.

amiehall

Mags30 wrote: »

I'm going to try this when I get paid tomorrow but I still think it's complicated. What if I buy wine and a newspaper in Tesco with my food? I'm thinking I'd need an awful lot of change for transferring the exact amounts from one envelope to the other.

I guess the way to go would be to use the self service tills if you don't want the cashier rolling their eyes at you. Then just put the different groups of stuff through separately out their different envelopes. Then you're not swapping change between the envelopes.

debtdesperado

Keep it simple! This is the system I have evolved:

All usual monthly bills go out of my main account (where my salary gets paid into) and are paid by direct debit a few days after payday.

I transfer my 'discretionary spends' amount into a separate account with a debit card. This covers going out, coffees with friends, cinema, books, makeup etc etc. I tend to spend a lot more and a lot faster with a debit card, so I generally take cash out to pay for things otherwise I tend to run out of money in week 2 of the month!

I then withdraw my monthly food budget from the main account and that stays in a pot at home, and then when I go to the supermarket I take out that weeks budget and pay in cash. I do a rough total in my head as I go round, and it really seems to stop me buying extra 'treats' as I know all I have is the cash I have on me.

Extra change just goes in my purse.

I did used to also have a separate tin for 'clothing' with the idea that I wouldn't necessarily spend it all every month, which I didn't on clothes, but I would tap it for going out money as it was too easy to access. So I try and limit the amount I have in cash at home :-)

Mags30

My envelopes are making me feel deprived:( I decided that €35 for food and €35 for other spends would be reasonable but it's almost gone and I only got paid yesterday.