Family finance: A very simple system to managing your family budget
Ways toManage You Family Budget
I stumbled on this video explain how to manage your family finance using a simple and idiot-proof system.
No its not keeping a ledger, nor is using some software system that you will have to buy and learn. It is called the envelop system.
What is the envelop system? And why is it such a great way to keep track of your money and family budget.
The envelop system is very easy to use because you do not have to learn any complicated method of keeping track of your money. Most other systems make you learn how to use sophisticated and expensive software. Some also make you set up a ledger that needs constant updating. While these are great they often cause people to get tired and give up.
What I love about the envelop system is that you can actually see how you are physically spending the money. Withcredit and debit a cards (plastica money) it is difficult to see the cash balance decreasing, so you may end up spending much more than you should.
How does the envelop budging system works?
- At the end/beginning of every month takes out a lump sum of cash out of the bank. This is the amount that you will spend for the month. Leave enough for your direct debits such as mortgage.
- Get a set of envelops. You can even use envelops from letters that you have gotten – recycle them.
- On the back of each envelop you write the name of what you will be spending the money on e.g. grocery shopping, petrol, clothes, gas, electricity etc.
- You then put an allocated amount of money in each envelop; remember you will not go over that amount for money for that category of spending. Write the amount of money on the front or back of the envelop.
- Each time you spend something from this envelop you deduct it and write the balance on the back of the envelop.
- If at the end of the month you still have some money left then you can use this to help pay off some debt you owe or put it in a saving account. You can also put it or spend it in another area/envelopment where you may have over spent.
This is a simple but powerful way to not only manage your family budget but also slowly get out of debt and save.
For extra resources on how to manage your family finance check out this site that has great resources on how to budget for your family.
