Envelope Budgeting System

getmore4less

If where DD is a problem then that is just a symptom that the budget is wrong fix the plan and then it won't matter where the DD are.

A simple solution to the a 4 week pay cycle just use 4 weeks pay to cover the next month, and adjust the cash flow to utilize the 13th payment for annual bills or create a buffer for the next year.

A good budget decouples the pay cycle from the spend cycle

4 weeks is 28 days, a month is 30/31 around a 10% difference which should be manageable as that 10% turns up later in the year as the 13th payment

A better place to move the DD if you really want to do it is just before payday so you keep the money in your bank as long as possible, especially useful if you are using a OD

The TRICK is not to spend the money.

Pixie5740

I have 1 current account account and 2 savings accounts (1 regular saver and 1 other savings account for my house deposit). My current account is where most of my "pots" of budgeted money is kept. I have standing orders and direct debits coming out at different times throughout the month. My gas & electric DD comes out on the 10th, my rent the 22nd, mobile phone DD is the 1st. As I'm self employed my pay day can change by a few days either side. None of this matters though as I use YNAB and apply the YNAB methodology. For example, each month I allocate £X for rent so it really doesn't matter if the rent goes out my account on the 1st or the 22nd.

I don't pay so much attention to my account balance more the balance of each category in my budget. If I want to purchase something I need to know that there's money in the budget to do so. I've only been budgeting properly since April and it was so good than when my car tax was due this month the money was already there. Same for my niece's birthday this month as I budget for birthdays throughout the year. I did have to dip into my emergency fund though as I hurt my back and had to see an osteopath but it was rather satisfying knowing that I had an emergency fund in place instead of whacking it on my CC like the old days.

Good luck with your budgeting. It's the first step in the road to financial freedom.

newthrift

I am beginning to start budgeting properly. I have had a vague budget and we have not and are nowhere near debt but I know that I fritter away money and it needs to stop. At the moment I'm not sure exactly how much extra I could be saving but over the next couple of days I am going to sit and have a good work out (I don't have a full day / half day for the next couple of weeks unfortunately so will have to do it in a couple of sittings). I don't have that many expenses really, not compared to most people, as my OH earns a lot more than me he pays majority of bills whilst I do the food shopping, housework and I arrange and generally pay for gifts ect.. This is an arrangement we made when we moved in together and we are both happy and it works for us However, as I say, there is most defiantly cut backs I can make and more money I could be saving. I'm hoping to arrange a new ISA as my current one's rate is due to drop in November, I would like another savings account that I can put money for the future away in to and then a current account - which ideally I would like to get paid interest on. I'm wondering about using actual envelopes and when I get paid (15th of each month) drawing out the money for my food shopping and fuel - my main spends. I plan quite ahead for Birthdays and Christmas so i may consider drawing out the money and noting it down as I go. If anyone has any advice where I should be looking for extra information or any advice it will be greatly received.

foxgloves

Hi,
I came late to budgeting, having lived outside my means from age 19 to my early 40s. I am now seriously in love with budgeting & we are debt-free, despite the fact that our income has halved due to redundancy. Becoming proficient at budgeting is life changing. I use the envelope system. Overall, our budget works like this:
We have one current account (joint) & our mortgage & all bills/direct debits are paid out from that. I budget £250 a month for groceries (for 2 adults) which includes cat food, cleaning products & basic toiletries. We have a £60 monthly allowance each, which we withdraw as cash & can spend on whatever we want but when it's gone, it's gone. There are no top ups. Petrol is bought on a credit card & paid off in full every month. We have to buy it, so may as well use the points to get some useful M&S vouchers. Now we get to the envelopes or Savings Piggies as I think of them. We have 6: Car maintenance, Household maintenance, Clothes, Holidays, Presents & Leisure/entertainment. I currently split £200 cash between these 6 envelopes, usually set amounts, with some getting substantially more than others. If one looks particularly flush I.e clothes, & neither of us really needs anything, I sometimes via a monthly payment into a different envelope.
Savings: We also have 2 instant access savings account. One is our WTSHTF fund for dire emergencies (that's water pouring through the roof, not my old kind of 'emergency' of seeing a dress & boots in the sale....) & the other is used to save up for specific things, currently a new bathroom.
The Savings Piggies (or envelopes) system really seems to be working for us. Seeing the available cash in each category really helps us focus on what is priority expenditure. I do try to keep a realistic cushion in our current account just so we don't get tipped into the red by a late payment or similar, but really, the bottom line is that once I've set the monthly budget on payday, & that includes paying into the Pigs, there shouldn't be any additional spending from the account.
My advice would be to give it a go......,& also to listen to Firewyrm because she appears to be a sort of one-woman budgeting guru!
Good luck,
Foxgloves (One time very naughty spender, now got her budgeting halo on!)

FireWyrm

foxgloves wrote: »

.,& also to listen to Firewyrm because she appears to be a sort of one-woman budgeting guru!

Aww shucks Foxgloves.

foxgloves

Oh go on Firewyrm, you know its true, lol! I enjoy reading your 'tough love' posts on here. I don't come on here as often as I used to as I seem so busy in the garden (I love growing food), have started a blog, it's the time of year for making lots of presents, etc, but I don't deviate from my budgeting habits these days........surprising how an A4 accounts book, a diary, a calculator & 6 envelopes can make such a radical difference to our financial situation but it's true! It's all in the organisation & planning (in fact just like weight loss......have lost 6 stones too & am sure the skills are connected!)
My name is foxgloves & I rate envelopes!!

asparagus1968

foxgloves wrote: »

Oh go on Firewyrm, you know its true, lol! I enjoy reading your 'tough love' posts on here. I don't come on here as often as I used to as I seem so busy in the garden (I love growing food), have started a blog, it's the time of year for making lots of presents, etc, but I don't deviate from my budgeting habits these days........surprising how an A4 accounts book, a diary, a calculator & 6 envelopes can make such a radical difference to our financial situation but it's true! It's all in the organisation & planning (in fact just like weight loss......have lost 6 stones too & am sure the skills are connected!)
My name is foxgloves & I rate envelopes!!

would love to read your blog foxgloves, you sound pretty inspiring too!

slowlyfading

I'm a massive fan of budgeting (having written blog posts on the subject!) and I think the envelope system can work wonders when starting out. The act of handing over physical money instead of just plastic makes spending much more real!

I use a digital version of the envelope system I suppose - I have a big spreadsheet with everything inputted and planned on it anything unexpected goes on and I can see patterns with our spending during the month. Anything spare gets transferred to our savings

getmore4less

slowlyfading wrote: »

I'm a massive fan of budgeting (having written blog posts on the subject!) and I think the envelope system can work wonders when starting out.

great for the short term, they sort out tracking issues,

The budget/plan is the allocation what goes in the envelope,

Envelope is more a tracking system for a subset of the budget items than a budgeting system.