How I’m Getting a Handle On My Personal Finances

Picture this: it’s Saturday morning, and you finally have time to sit down and check your online bank accounts – you know, the ones connected to all those swipes of your credit and debit cards? Well, what you see while reviewing your accounts surprises you – how have you spent $635 in two weeks since you paid off your last statement?! You can’t think of one major purchase that happened between now and two weeks ago – you’ve simply spent $635 on random purchases. 
 
This is me at least a couple times a month – going online to check my accounts and wondering what I’m going to see and mostly getting stressed out about how much money I’ve blown without even realizing it.
 
For the longest time – for YEARS – I haven’t had a strong grasp of my personal finances. I’ve done a decent job – I save money each paycheck, have paid $100 extra each month on my graduate student loans, contribute 8% to my retirement account, and always paying off my credit card statement in full – I’m not a total wreck.
 
However, what I’ve recently realized is that I’ve been spending money like crazy on stuff I don’t need. What you spend on smaller, day-to-day purchases has a much greater impact on your bank account than what I realized. Think about all the little swipes – the impulse purchases at Walgreens, the shirt at Target, your favorite Starbucks drink, etc. – it all adds up.
 
 I started thinking of this scenario: Eventually, I want to move back to Denver and buy a home. Now, the housing market there is crazy – it’s a seller’s market through and through. In the neighborhoods that I know and love, the cost of buying a home is going to run between $300-450,000. Now, a twenty percent down payment is going to run anywhere between $60-90K. #mouthdrop 
 
Having just spent $13K to pay off my student loan debt, this seems like a 5-10 year goal and not a 2-3 year one (I’m shooting for Denver 2020 over here). I need to make some changes so I can save more monies!

Setting a Budget

Every year, I create a budget. It’s simple – I have a template on Google Sheets, and I fill it in for the year based off of how much I make, how much my monthly/yearly expenses are, and how much I want to save each month. And you know what? Each year, I only look at that budget approximately 2-3 times a year, not really analyzing anything, just adjusting numbers a little here and there based off of changing bills. A couple years ago, I also started using Mint, a free online personal financial management service. I created multiple budgets on there to help guide me with my spending. However, I still haven’t been successful with sticking to any budget that I set.
 
Last week, I was doing some research on budgeting strategies and came across Jordan Page of FunCheapOrFree. She had published a YouTube video a couple weeks ago titled, “Simplest budgeting method ever! | Envelope budget”. Of course, I was intrigued and  watched her video:
 
 
Y’all! I got so excited about this old-school way of tracking expenses – I’m one of those people who holds on to every receipt, anyway. I think I finally found something that is doable for me. I’d love to be able to save an extra $200-300 a month by sticking to a strict budget.

Overview of The Envelope Budget System

Based off of what Jordan says in the video, you should have only TWO budgets (based on what you’re in charge of buying for your household). I’m in charge of all of my spending, but the two budgets that I chose to focus on are the two biggest question marks for my personal finances: food and other.
 
What am I going to consider to put in the food category? Groceries, coffee, meals out, and bars. I’ve allocated $200 a month for this budget, or $50 a week.  The second budget that I’m going to focus on is other, which includes entertainment, salon services, other aesthetic services. I’ve allocated $200 a month, or $50 a week. Now, I’d like to scale back the budgets even more, but for now I’m starting with $200/month for each budget, and I will do this for one month to see how effective or not this method is for me.

Tracking Expenses

  • Step 1: Get a letter-sized envelope and divide it in half with a line.
  • Step 2: At the top of the envelope, label it with the current month’s name.
  • Step 3: Label each of the two columns (food + other for me).
  • Step 4: Underneath the column label, write out the amount of money you have to spend for each week. For example, I have $200 to spend on food for the month, so I can spend $50 per week on food. For my other budget, I have $50 per week to spend.
  • Step 5: Divide the envelope up into 4 rows for four weeks in a month (if there’s a month with 5 weeks, then create 5 rows).
  • Step 6: On the side of the envelope, write out the dates for each of the weeks.
  • Step 7: Place the envelope inside your purse/wallet and have it with you when you’re out.
  • Step 8: When paying for something, you have to take out your card or cash, so just pull out the envelope, too, and track how much you just spend in the appropriate budget column. 
  • Step 9: Keep a running total of how much money you have left for each week. If you go over on your food budget for the week, then you can only borrow side-to-side from the budget next to it – but you can’t borrow money from the food budget for the upcoming week (you’ll never catch up and won’t have enough money in your budget for the end of the month).
  • Step 10: Stuff the receipt from the transaction neatly into the envelope, and you’ll have all your transactions in organized envelopes for the entire year.
 
I’m going to give the envelope budget method a try this week. I think it’s going to be so interesting to hyper focus on how I spend my money by keeping every receipt and writing down every transaction that fits into my two budgets. I love a good challenge, though, so I’m going to work hard to make it work for me.

Has anyone here heard about and tried the envelope budgeting method? If not, how do you stick to your budget? I’ll take any and all advice/feedback on this topic. Share in the comments below!