Envelopes can fix your budget

There are so many people who’ve tried every budgeting tip and trick in the book but still can’t seem to figure out how to handle their money by themselves. It’s just not a natural tendency for most people.

If you’re in this situation and maybe have been for a while, there’s a “scared straight” kind of technique that I want you to try. It’s a real throwback to a different era — but it’s proving to still be very successful today.

The strategy is pretty simple: Pay in cash for whatever you can, using envelopes to divvy up your money and keep you within budget.

My General Manager Christa made it clear to me about eight or 10 years ago that she had trouble with money just vanishing out of her life. Then she hit on the idea of putting money into different accounts for different purposes.

Today she has three separate checking accounts and one savings account. She has each of her paychecks automatically split among these four accounts each month. Christa then uses Mint.com to track her finances online (and using the mobile app) for free.

Depending on your bank, you may not have the ability to sync your accounts with Mint, however there are plenty of free budgeting tools and apps out there for you to try.

Of course, a low-tech way to get a handle on your finances would be the envelope method.

You simply take envelopes and write “groceries” on one, “utilities” on another, “walking around money” on a third. There should be a separate envelope for each part of your life that requires money.

I often tell couples to do this particular method of budgeting to keep them on the same page throughout the month.

I once sat down with a couple that had more than $30,000 in credit card debt. We came up with a 30-month plan for them to get out of debt that involved the envelope method. They didn’t think it would work, but they extinguished their credit card debt in 21 months.

Debit cards and credit cards can be the Bermuda Triangle of your wallet because it’s so easy to lose track of your finances when you use them. A study done by Dun & Bradstreet found that people spend 12-18 percent more at fast-food restaurants when they use plastic instead of cash.

That’s why I recommend that on payday, you take out the dollar amount you need until next pay period and split it up among your envelopes. When one envelope empties, you either take money from another envelope or you do without until next payday.

Visit ClarkHoward.com for more info, or get his best-selling books signed with free shipping at GetClarkSmart.com.

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