How fine-grained you want to get with your envelope categories is a personal choice. With envelope budgeting we actually completely decouple your budget from your real-life accounts (checking, savings, credit cards, etc.) If you want to put money aside for an emergency fund (and you should being doing this) you’ll want to have an envelope called “emergency fund.” If you are saving for a vacation, have an envelope for it. Doing all of those transfers gets confusing and again, in the framework of envelope budgeting, what are those transfers for, and to which part of your plan and priorities do they belong? Here’s another example: are you one of those people that transfers extra money to your savings account when you think you can afford it, but then inevitably transfer some of it back to your checking account when it is time to pay a larger than expected credit card balance? Or maybe you have three different savings accounts and you transfer money to different savings accounts for different things, like one is for vacation, another is for your emergency fund and the third for miscellaneous expenses. Is the money you automatically transfer to your savings for an emergency fund, or are you saving for vacation or will you just use it later in the month to cover rent or groceries? With envelope budgeting every dollar is supposed to be a part of the plan. This is a good strategy, but I’ll be honest, it kinda defeats the purpose of envelope budgeting. The idea being, if you never “see it” you can’t spend it.
Here’s an example how people commonly get tripped up when using an envelope budget with transfers. Many people have learned that one of the best ways to save money is to transfer money to your savings account directly from your paycheck. For number geeks like us, that is no good, you always want your money working for you, no matter what type of budgeting method you implement. When this happens you can end up putting your cash, sometimes pretty significant amounts, in low, or even zero interest accounts. It forces you to look at the money you have right now and decide how you should spend it, or importantly, save it. But sometimes it’s easy to get a little lost and over complicate your envelope budget with the accounts you have in real life, like your checking, savings and credit card accounts. But envelope budgeting is more than that it’s also a practical and philosophical money management strategy.
Recording savings bonds in banktivity 6 full#
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