(MoneyHippo.com) – Setting up a budget is essential to getting finances in order and keeping them there — as long as you stick to the plan. Using a spreadsheet to outline line-by-line expenditures might work for some people, but there’s a simpler way to keep track of inflows and outflows. The envelope method is an effective way to track physical cash.
The first step is to gather envelopes. Write an expense category on each one with the monthly amount you’ll need. When you get paid, withdraw money to cover the total and divide it between the corresponding sections. As debts come due, only use the cash from designated envelopes to cover them. Once you run out of funds for a category, you must wait until the next payday.
If you run out too quickly, it’s time to make some budgeting changes. This method is effective because you can see where you stand with each expense. You might feel tempted to take money from other envelopes to cover obligations when your funds run short, but that will only leave you struggling in other areas. Instead, make spending adjustments and address the shortfalls in the following month.
While this system might be a significant change from dealing with finances online, it could be the best way to get a firm handle on your budget.
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