I was asked off the blog about my blog’s mention of a budget so I thought I’d describe it here.

The vast majority of our spending problems revolve around our day to day spending or variable part of our budget. These are numbers that change every month and don’t include bill payments.

Variable expenses include things like  food, spending money, gas, entertainment.

The key to the envelope system is to a) reduce your spending and b)stick to the budget you set.

You’re setting a specific amount of cash and allocating it to your spending and the key is to forget about using debit and credit cards. Once a week, refill your envelopes.

Here’s what it ‘could’ look like:

Food $150

Gas: $50

Entertainent: $20

Clothes/Gifts $25

Kids’ Allowance $20
Misc: $50

Total: $315

Allocate envelopes or jars that are labelled for each fund. At the end of each week, if you have any money left over you could use it for a specific fund or for a treat.  If one area runs low you might borrow from another area temporarily and shift things around but the idea is to stay with cash.

The key to your variable spending budget is that it does not equate to all your excess money. If you earn $1,000 and your variable spending is about $315 and your weekly bills total $385, the $300 that is left shouldn’t be spent. Consider doing a 60/40 split between debt repayment (topping up bills beyond their minimum payment) and savings.

As a freelancer I don’t always have a set amount that comes in each week so managing to refill the envelopes every week may start out as a challenge but once I get things under control, I’m hoping it’ll be smooth sailing. Two of my bigger clients only let me invoice once a week so their amounts tend to be higher than a bit of money here and there such as it is with some other clients. I do expect this to help me manage spending, saving and preparing for paying taxes quarterly.

I’ll let you know how our plan works out. Anyone with other budgeting tips, feel free to reply!