Tuesday, July 12, 2011

Me and My Quirky Budgeting Style

Payday is always a happy time! No matter how bad my mood is or how down I am, payday makes me cheerful. No, I'm not mukhang pera or anything like that, but I get happy because it's time to sit down, relax, and try to work on my budgeting so I can start anew!

My pay is not as huge as some of you may get, but with my simple lifestyle, savings-conscious budgeting style and once-in-a-while splurges, I'm good to go. So how do I go about with budgeting? You may think playing with numbers on a paper is so easy, but you can all attest how hard it is to follow through, right? It's so easy to write that you'll allot this and that amount to savings, and this percentage of your pay on this and that for spending, but once you actually get the money whole, sometimes those good, well-thought of plan flies away as easily as the money flies away from your hands.

This is why I adopted the Envelope Style method! It has worked so well with me, and the division of the money from whole to being broken down into its allotted amount helps me realize that even though I have this chunk of money I've just withdrawn, it is not unlimited and a specific amount has already been divided as per my budgeting.

Putting in money into their designated envelopes help me see where EXACTLY my money goes.

So what is the envelope style?
Envelope Accounting or the Envelope System is a method of budgeting where on a regular basis (i.e. monthly, biweekly, etc.) a certain amount of money is set aside for a specific purpose, or category, in an envelope marked for that purpose. Then anytime you make a purchase you look in the envelope for the type of purchase being considered to see if there are sufficient funds to make the purchase. If the money is there, all is well. Otherwise, you have three options: 1) you do not make the purchase; 2) you wait until you can allocate more money to that envelope; 3) you sacrifice another category by moving money from its associated envelope. The flip side is true as well, if you do not spend everything in the envelope this month then the next allocation adds to what is already there resulting in more money for the next month.
With envelope budgeting, the amount of money left to spend in a given category can be calculated at any time by counting the money in the envelope. Optionally, each envelope can be marked with the amount due each month (if a bill is known ahead of time) and the due date for the bill. - Wikipedia, Personal Budget: Following a Budget

Basically, what you do is get several envelopes and mark them according to what you have originally set on paper. My budget usually revolves around this percentages:

60% - Savings. And out of that amount here is the breakdown:
  • 39% - Emergency Fund
  • 39% - Insurance Payment
  • 22% - Travel Fund
40% - Expenses. And out of that amount, I break it down to:
  • 36% - Allowance
  • 24% - Credit Card Bills
  • 20% - Tuition
  • 20% - Water Bill
Each of those break downs, I put it in the allotted envelopes, and that's it! The big chunk of my money disappears and I get a feel of how they are distributed according to their flow. It reduces the chance of overspending on one aspect and undersaving on another. This way, there is a place for everything and everything is in its place!

It has been so useful for me for the past two years. It has taught me to be disciplined, to recognize how much I'm putting into savings and expenses, and most importantly it avoids me having tap in to other resources by sticking to the contents of the envelope ONLY, and trying workarounds and money-stretching ideas. I like it because they are alotted neatly! But my envelope style is not THAT quirky, but I do get a lot of "wow, you still do that?" with matching wry smiles. I don't mind, well, it's not even unique but it works for me.

1 comment:

  1. saw some cashbook at saizen yesterday and I though about you. hahahahha!


Send in your advice, comments and greetings! :)