How can the envelope system of money management help you? Learn how this unique budget setup can help you with money management and debt relief. One of the more common problems with budgeting is the discouragement people face when they realize they have the rest of the month left but no money. Don't feel alone, this is too common a problem, especially if you budget but don't track your spending.
There is an old budgeting system that was used years ago, but fell by the wayside to more modern methods. But, as with anything, there comes a time when the past is now in, and that has happened to this budgeting system too.
The Envelope System, popular years ago, involved setting up envelopes, allocating your monthly income to expenses, then putting the required cash into each envelope. The term Zero Based Budgeting came about because all money was allocated to envelopes and therefore "budgeted to zero" each month.
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Considering a monthly paycheck, if you had an annual expense of $600, you put one-twelfth ($50) in that envelope each month, a quarterly expense of $225 required one-third or $75 in its envelope each month. On a weekly paycheck, you would put in 1/4 for that month's expenses, one-twelfth for the quarterly expenses, and 1/52 for the annual expense into their respective envelopes.
When it came time to pay the bills, you had the money to pay. You also took the full risk of safeguarding your stash. During the Depression, and for years after, banks weren't easily trusted. At that time, the Envelope System was also a common way to save money. The savings envelope, however, was kept under the mattress! Laugh as you may, the method was solid, based on necessity and is now having a resurgence in popularity in America.
The lack of popularity of the Envelope System came about with the advent of FDIC insurance on banks, and money deposited with them. Checking accounts, savings accounts, and CD's all helped people to safeguard their money and pay their bills.
Unfortunately, banks do a poor job of helping people manage their finances. They only track what you have in the bank, and what you spent. Banks do nothing to help you budget into categories of spending, tracking what you spent, and what you have left to spend or save. Nor do they help you manage a variety of accounts, loans, and credit cards. This is the part of budgeting that has come to haunt many people today, managing their debt load.
In today's society, automatic deposit of paychecks, and the use of checking accounts, credit and debit cards, etc., all contribute to your not "seeing" and "holding" your cash. Consequently, it is very easy to lose track of what cash, or money, you really have to spend.
Now, I am not saying you have to get those envelopes ready, take your money out of the bank, or any such thing. I just want you to understand why sound money management is so important to your financial future, and how the envelope system of zero based budgeting works to:
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There are two products we highly recommend that follow the Envelope System. Both are software. Personal budgeting software is for use with your computer and/or PDA. The other is YouNeedABudget. Check them out and see if one of them will work for you, and your lifestyle: