The envelope system is an excellent way for saving and managing your funds for future expenses in the short, mid, and long term. The human being generally has a tendency to cling to physical money and is afraid to spend it all. But when the money is on a debit or credit card; for some unknown psychological reason it becomes easier for us to splurge; it doesn’t hurt as much.
So… What is the first thing we must do to get started with the envelope system? First of all, we must analyze our plans for the future and the expenses that lie ahead in the short, mid, and long term.
What are my short-term expenses? Any expense that will be incurred during the current month. We will place the amount that will be used this current month in these envelopes for the running expenses.
- Groceries
- Gasoline or fuel
- Entertainment
- Eating-Out
- The allowances
- His and hers
Each month we must calculate how much money we are going to need for each category and put it in its envelope to use it. We must discipline ourselves to only use what we have available in the envelope.
What are the medium-term expenses? Any expense that will be incurred between 2 months a year. In these envelopes we are going to divide the number of months that we have to save and we are going to place the amount in that envelope monthly. Example: Let’s say that the registration of our vehicle costs $ 120 per year; we will need to save $ 10 a month to have the full amount needed by the end of the year. That being said; for every category, we will place in each envelope, every month the predestined amount for that category until reaching the final goal.
- Clothes
- School supplies
- Vehicle registration
- The renewal of the driver’s license
- Housing association
- First fruits
- Christmas, Thanksgiving, Anniversaries and Birthdays
- Car maintenance (tires, wipers, battery, oil changes and filter)
- House maintenance (painting, plumbing, and genera fixes)
- Some car insurances are paid every 6 months or once a year to provide savings.
- Missionary trips (these involve many expenses) – vaccines, plane tickets, food, lodging, etc.
- Vacations – We must save little by little every month to be able to go on vacation without bowing up the budget of a single month.
What are the long-term expenses? For these we must determine in how long (being realistic) we want to achieve that goal; and then divide the total amount of the goal by the number of months you have available to set aside money. This amount will be set aside monthly to put in the envelopes.
- An extraordinary vacation out of the ordinary.
- The deposit for the purchase of a house.
- The purchase of a car, boat, RV, Big Toys, etc.
- The purchase of any expensive electronic equipment.
Let’s say you want to buy a car in 3 years; You will have to divide the budgeted cost for the car into 36 months and save that monthly amount for up to three years.
No one said it will be easy; but if you work little by little in your dreams and in what God has put in your hands; God will provide.
To organize your envelopes you can use a plain white envelope; a wallet with divisions, plastic envelopes (pencil pouches) from the Dollar Tree; prepare your own card-stock envelopes; and / or digital envelopes with the use of electronic bank accounts which are more effective to save for long-term expenses.