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Budget Your Money Using the Envelope Method


Do you have the habit of 'keeping up with the 'Joneses'. Striving to achieve or own as much as the people around you. For instance, 'If you want to keep up with the Joneses in certain neighborhoods, you will have to own at least a car, wear designers clothes, take your kids to expensive schools....' To fail to 'keep up with the Joneses is perceived as being poor!

Kenyans are notorious for catching a "luxury fever". It does not seem to matter that we aren't rich yet, as long as we look as if we were.

Is it difficult to live within your means?

If so, then you should start a personal budget system to account for your monthly expenses. An easy, effective, practical method is the Envelope System.

8 tips to easy Envelope Budget System:
  1. Start by tracking your daily expenses.
  2. List down all your monthly expenses. Refer to your daily expenses notebook.
  3. You can start by grouping the list into categories such as Fixed: Rent, Utilities, Transport plus many more. 
  4. Get some envelopes and label each of them with the expense classification you defined. When all is done, get one more envelope and label it Pay Yourself First. This is the 10 or 20 percent of your income that you save every month before spending. This amount can be deposited in a savings bank or a Sacco.
  5. Next, create a budget. Distribute and allocate your current income into envelopes. Make sure that you fill in the Pay Yourself First envelope before the others.
  6. Keep your envelopes in a safe and secure place.
  7. Use certain amount from the envelope for your daily expenses. For example, if your planning to buy the household items, instead of carrying the whole Household items envelope shopping; plan ahead an carry the required amount.
  8. At the end of the month, whatever is left in the envelope is carried over and added to the next month's budge. This is the reason why, it is important not to spend everything in the envelope, so that you can save up for bigger purchases and unexpected expenses.
In addition:
  • Put the receipts into the envelope from where you took the amount of money. This will enable you to easily track where the cash was spent.
  • Instead of carrying over what was left the previous month to cater for more expenses. You can mobile transfer the amount to any of your account, saving for an emergency.
  • Try not to burrow money from other envelopes, discipline yourself to only use the budgeted amount.
Note: this is a dynamic process. It involves constant planning, tracking, analysis and adjustments to your budget allocations and spending habits until you have successfully gotten yourself out of debt and comfortably living within your means.

Lastly, the best part about the process; is that you don't have to worry much about saving money because Pay Yourself First  envelope is automatically doing that. More so, the remaining monthly amount after paying for your expense will allow you to start 'Emergency Fund' account.

Note: If your neighbourhood is prone to security issues. Deposit the income into a bank account, and replace the amounts in each envelope with 'paper' money.

If you're familiar with Microsoft Excel, download a Personal Envelope System here.

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