I have tried multiple software programs to help me with a personal budget, but none of them seem to work the way I want them too.  They all seem to let you set up a budget, but then only let you know if you are on target or not on target.  My brain works like the old “envelopes” budget system. 

If you are not familiar with the “envelopes” budgeting system……. It is very simplistic:

Calculate all your expenses each month (groceries, utilities, rent, insurance, loans, etc. + any potential savings you want to achieve).  Make sure that your budget is not greater than what you (and whomever you are creating this with) bring home each month. 

Based on these numbers, you can calculate how much of your weekly, bi-monthly, or monthly paycheck needs to be associated with each budgeted item as well as which envelopes take priority.

Grab a separate envelope for each budgeted item and write down the budgeted monthly amount and the contribution by person and the frequency.

When money comes in… you divide the funds according to the budget you created and place the funds into their designated envelope.  When you have to pay a bill associated with one of the budgeted items, you take the funds from that envelope.

The great things about the envelope method are:

  • This system is focused on savings as each envelope becomes a “dedicated saving account”.
  • You can have expense centric envelopes (like utilities and rent) and savings focused envelopes (like vacation or new car down payment)
  • Each envelope can be for short term or long-term needs
  • Each envelope can be as specific as you want to make it or as general as you want
  • You will always know how well your budget is doing because if you have no money in an envelope, your budget is off target and needs to be adjusted immediately (and then you will have to pull funds from another envelope or two which could mess those budgeted amounts).

I have taken the envelope method and modernized it slightly (by creating an excel spreadsheet) where each column is an  “envelope” and each row is a deposit or payment (broken out into/over one or more envelopes). 

It is very satisfying when my wife asks me “how much do we have to spend on vacation”…and I can tell her how much we have saved and what the max budget for the next vacation is….so we make sure we don’t overspend….and I do see that we are able to save more and see our savings grow using this method.

If you would like a copy of my excel spreadsheet template, just let me know and I will be happy to send you a copy.