Wednesday, 20 November 2019

Budgeting for Beginners: Cash Envelope System | Weekly Paycheck

Budgeting for Beginners

Today we will be talking about how to budget for beginners and how to set up your own cash envelope system. I remember a few years ago when I applied for my first credit card, I did not know anything about credit or debit. And I thought it was neat that you can charge your expenses to this piece of plastic and pay it back on your own terms plus interest. Here I am, finally budgeting my money.

Read: How To Manage Your Money - 50 20 30 Budget Rule

I have to say I truly do love it. I look forward to my paydays way more now, it's so fun budgeting and studding my cash envelopes and sharing everything with you.

Let Get Started


The first thing you're going to want to do is to list all of your expenses.
Budgeting for Beginners: Cash Envelope System

These are just an example of common expenses, and after listing all of your expenses, what I did was put the due date of the expense next to it. This is completely made up, but we'll pretend these are our expenses.
Budgeting for Beginners: Cash Envelope System

I find that doing it this way is much more convenient and way more organized. 

Sinking Funds

The next thing you want to do is list all of your sinking funds. A sinking fund is anything that maybe you have an annual payment on, such as your car registrations or Amazon price, and if you celebrate Christmas then Christmas would definitely be one. 
Budgeting for Beginners: Cash Envelope System

It's something were you continue saving up for, knowing that it'll eventually come, and when it does come, you will have your payment. And you won't feel guilty about spending that money because that's what it was there for the entire time.

As you can see I have listed our sinking funds in alphabetical order. I preferred that way, but obviously, you can do it however you'd like. Now that we have listed our sinking funds, we are going to go through them and find any of them that is an annual payment and for this, it happens to be the first 3 here. Amazon prime, car maintenance, and Christmas
Budgeting for Beginners: Cash Envelope System

Annual Sinking Funds

Now that we have marked our annual sinking funds. We will want to create a budget for them. The first thing is you are going to find out when each one is due, for that one-time payment.
Budgeting for Beginners: Cash Envelope System

Next, we will be creating the amount due for them, so for amazon prime, I personally pay $60. Car maintenance, let's say we owe $380 and for Christmas, $500 is what we want for our budget.

The way I find this is I make a list of everyone that I want to buy a present for, I give them a budget and I add that total amount due and I divide that by how many checks I have left. Let me explain what I mean by that.

We will start with Amazon prime, this is due June 30th, so I count how many paychecks I have exactly from March until June 30th, that is (9 checks) because I receive my check every 2-weeks. That is twice checks in one month. Hopefully, you got that. Then until October 10th, that is (16 checks). Then until December (22 checks) 

Next, we will be taking the amount due for the annual payment and dividing it by how many checks we have left.
Budgeting for Beginners: Cash Envelope System

Now that we have the annual payments out of the way. We can move on to the rest of the sinking funds. Now we will be determining what our idea amount will be for each sinking fund that we want to put from each paycheck. We already know what amazon prime will need $7 from each paycheck, car maintenance we need $24, and Christmas will get $23.

Budgeting for Beginners: Cash Envelope System

I put $10 into my clothing envelop because I don't buy cloth a lot. As the list goes on, you can arrange your own list as you want, this is just my own idea.

You're going to need to figure out how much money you use for gas in one week and double that if you get paid by weekly, next is gift, make sure you know how much you need for gifts and whose birthday or any celebration that's coming up in advance, so you're not scrambling for money for gifts.

If you have any pets, you want to make sure they have their own envelope for anything that they might need. Your savings is up to you.

I put $10 into my work envelope and that money is for anything that I need for work.

Like I mention before, this is entirely up to you, this was just my little input on this and I hope you find it very helpful. 

My Expenses

Budgeting for Beginners: Cash Envelope System

Now we will be taking that total amount due and dividing it up into check number 1 and check number 2.

Now that we have our budget laid out for us, let's pretend check number one that we get paid $1,092, and subtract our total from check number one which is $705 = $387. That $387 we are solely for our sinking funds.

I hope this makes sense to you. I try my best to go through it thoroughly.

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