Envelope Method to Budgeting

Many of us wonder where our money goes in the end of each paycheck, and may of us find more month in the end of the money. One of the ways that I recommend to handle your budgeting is to make a zero based budget. In this budget you first start with your income for the month and then allocate reasonable amounts of money to each major expense.

Here is an example of a zero based budget. The first column is amount of money allocated to each expense, and the second column I subtracted the next expense (for example I started with 3229 in income, subtracted 150 for saving and ended with 3029

Income	3229	3229
Saving (roth)	150	3079
Housing	400	2679
Car Payment	170	2509
Car Insurance	83	2426
Debt	670	1756
Recreation	250	1506
Gas	300	1206
Food	200	1006
Extra Debt	1006	0

An important thing to notice is that I ended with 0. the $1006 I had left over went into additional debt payments, but in this case you should put your most important priority in the last column.

Right now I follow this method to budgeting and I have enough control to make sure I dont go over my limits. However, many of us always go above and then wonder why they have no money left over. I recommend following an envelope method to budgeting in this case. From the example above, you pay your fixed expenses (housing, car, debt) and you take out money for every other expense. In the example above you make 3 envelopes for recreation, gas, and food, and then write down the amount you are starting with. You put the amount of money you wrote in the envelope and you ONLY USE CASH for these expenses.

This is a good way to track where your money is going and should be used for people who are serious about tracking expenses.