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Can an Envelope Budget Help You Get Out of Debt?
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If you’re seeking to get out of debt, an envelope budget is worth consideration. Although it requires willpower and dedication in order to work, it’s a method that can help you start to become more aware of how your money is spent. Also, it’s very simple to implement. How can an envelope or money jar budget plan reduce your debt and do you really have to use envelopes or jars to make this plan work?
The Basics of an Envelope Budget Plan
When you decide to use an envelope budget to help you manage your debt, you must first begin by evaluating the amount of money you earn each month, as well as the specific things that you need to buy. Once you have figured out how you use your income, it’s time to designate one envelope for each spending category. For example, you may need to create envelopes for your mortgage or rent, groceries, healthcare and entertainment. Decide how much of your income will be devoted to each category and stick to it. The final step is to go withdraw the appropriate amount of cash from your bank and deposit the correct amount into each envelope. In this plan you’re going to be living on cash, rather than using debit cards and credit cards. This helps improve your mindset about money as you can see and feel how much money you truly have.
Technology Can Help You Adjust to an Envelope Budget Plan
If you don’t like the idea of carrying around a bunch of envelopes in order to help you achieve freedom from debt, there are several software programs that work on the same principle, but don’t require the use of actual envelopes. Keep in mind though that envelope budgets may take a few months before they start to make a noticeable impact on your finances. If you find that it’s difficult to leave your old habits behind and start sticking to your new envelope budget, you may find that you feel more motivated when using traditional methods instead of software programs. Regardless of how much technology is used, envelope budgeting is an effective way for many people to become more aware of their spending habits and take steps towards handling their debt and saving money
How Are You Going to Recover from Overspending on Christmas?
It’s the first week of January and you’re filled with financial dread. You can’t believe the shape of your finances. Not a good way to start a new year, huh? It might seem daunting to meet new year’s financial resolutions when you have no money in your account. So many people are in the same boat as you. Wait until the credit card statements start flooding in! Some of you spent cash only on Christmas, which is smart, but whether you spent cash or credit cards, if you overspent you’re feeling the cash crunch as you’re struggling to pay January’s bills.
Here are some tips to help you recover NOW and then plan more effectively for the next Christmas:
NOW:
- Eat Frugally. Shop sales, eat up those leftovers, forget restaurants and don’t even think about buying your daily Starbucks or Tim Horton’s until you’re back on track.
- Clip coupons. Become a coupon queen or king. You might be surprised at how fast the savings add up! Why not consider putting everything you save into a jar to pay toward your debt or do it all year long to help you save toward next Christmas?
- Set up a strict budget and follow it to the letter. It’ll help you get back on track fast.
- Prepare for next year carefully.
How will you be better prepared next year? That’s a good New Year’s resolution. Here are some tips:
THEN:
- Set a holiday spending limit and stick to it. Then portion your income so that you put aside a portion of that money between now and the holidays.
- Shop throughout the year instead of all through December. One of the reasons Christmas hits us so hard is that we often pull the money out all at once, leaving a gaping hole in our finances. Yes, there are great sales after Thanksgiving but if you see something perfect for a good price in the summer, for instance, why not buy it and put it away? That’s one fewer gift to scramble for next December. Keep a running list so you know what’s been bought.
- Draw names. Did you overdo it buying for all the siblings, cousins, aunts, uncles, and neighbours? Maybe it’s time to set a limit. Maybe drawing names or giving smaller tokens (such as homemade gifts like tins of baked goods) to some of those people is a better idea.
- Start a Christmas fund. Open a high interest savings account now. Portion a certain amount of your income to go toward it automatically. Don’t make this money easily accessible! You can use this as a Christmas fund alone or double this account as an emergency / savings / Christmas / holiday fund.
- Keep all your holiday spending money separate. Open a separate bank account, use cash, or use a specific prepaid debit card. This can help you stay within your limits and not leave yourself short for January.
Hopefully you had a lovely holiday, despite your financial faux pas. A bit of frugality can help you get out of debt quick and some planning can help you have a smoother season next time.
Doing a jar or envelope budget? It’s a great way to portion your income. Learn more about it: Jar Budget Technique.
Save Money on (Almost) Everything You Buy Online
The savvy shopper shops around for the best deals, and the best quality. When you make a major purchase, it’s very wise to use tools and resources to help you find the best brand, figure out what specs mean and how they impact your wants and needs for a product, read reviews from other people who’ve bought that product, and save money. I’ve recently discovered a great gem for saving money online.
ShopGala.com offers online coupon codes for everything from: big brand names to specific stores and restaurants. Since more people buy stuff on the internet than ever, coupon codes are fantaastic. Instead of coupon clipping and dealing with expiry dates, you can check ShopGala and find codes that will give you a % off discount or free shipping or other deals as well.Not only can you use these codes to buy things but you can use them for online services as well. Save money on downloadable software, web hosting, and domain registration and then when you’re shopping for gifts or a new computer or something else you can get discounts as well.
In this day and age where we want to and need to stretch our dollar, couponing can make a vast difference. If you’re doing an envelope or money jar budget, don’t forget to take that % off or fee saved when you use an online coupon and add it to your savings or rainy day fund. It can become a fun (and very rewarding) challenge to see how big you can grow that fund!