Getting the Budget Under Control: Six Steps to Managing an Envelope System.

My wife and I are getting ready to get our budget ready for August. Every time we balance the budget I tend to get frustrated because it seems like we just don't have any extra money. We have our $1,000 emergency fund in place and the majority of our debts are on balance liquidation programs and all are being paid as agreed, but I feel we should have some sort of extra funds either to slap more towards our credit cards or so I don't worry we don't have enough money even though we have an emergency fund. So, I think it's time to start an envelope system to enhance the budget.

What is an envelope system? An envelope system is a great tool to organize your finances and keep your spending under control. If you are on a budget like us and are still over spending, an envelope system may be the way to go.

Here are six ways to manage a cash envelope system:

Figure your paycheck into your budget - Most people cringe at the word budget, but budget is what you must do right down to the penny if you are going to successfully use an envelope system.
Figure what bills can be paid with cash - Some bills you just won't be able to pay in cash. If you have payments set up on automatic payment that would be one example. You can however, have envelopes for gas, groceries, clothes and entertainment.
Hey, there's money in this envelope! - After you have calculated your expenses, fill each envelope with the cash you have allotted for each budgeted item. If you have $100 budgeted for groceries each week, put $100 in the envelope for groceries.
Where did all the money go? - Once all the cash in the envelope is gone, it's gone. You are done with that category for the month or week, depending how you have to divide your paycheck. If you have a $100 budget for clothes and you spend it all, guess what? You are done with the clothing budget for the month. You have to wait until next month to re-budget for that category. No cheating!
Behind me Satan! - Don't be tempted to over spend. There is a psychological reaction that occurs when we spend cash. It doesn't hurt using a credit card or debit card the same way it does with cash. Work towards using cash whenever possible. You will be less likely to over spend.
Good things come to those who wait - Just like your overall budget, your envelope system will take a few months to get the bugs out. Once you get it down it will be riding a bike. Once you start seeing your debt melt like butter, you'll want to keep going.

You will most likely need to base your categories around payment due dates and pay periods. So, if you are paid twice a month, you will have to determine what bills are getting paid from each check. By spending each check on paper you won't have any surprise bills. If you are having a hard time balancing your budget give the envelope system a try...All you have to lose is your debt.

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

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