There are many reasons people struggle with saving money. Many factors that we are sometimes are unaware of. In this article we will discuss some of these reasons. 11 reasons you are struggling to save money 1.Cost of living It would be an injustice to talk about saving money without acknowledging the cost of living. The inflation rate keeps rising which means prices are hiking while our income remains the same. High costs of living, such as housing, healthcare, and education, leave little room for saving after meeting essential needs. 2. You don't Budget (or stick to it) A budget is to your finances what water is to your body. You might survive a day or two without it but in a long term you will feel the effects. Without a clear budget, it's challenging to track income, expenses, and savings. Overspending becomes common, making it difficult to save 3. You live beyond your means Spending more than you earn will leave you with nothing to save. Spending more than w...
A cash envelope system is a budgeting tool used by many. It is a way to track exactly how much money you have budgeted for each expense category for the month and tuck the cash away. You essentially categorise your expenses and then put money in an envelope labeled with that category.
The advantages of using Cash Envelope Systems
Keeps you on track with your spending
It enforces discipline and holds you accountable
It limits you and helps avoid overspending
Forces you to plan ahead
You will not have overdraft fees and credit charges
You will also avoid impulse purchases.
Steps on how to use Cash Envelope Systems
Create a unique budget every month
You need to tailor your budget according to your needs (and wants) for that particular month. Make it as accurate as possible.
Choose what budget categories to use with a cash envelope system
You already know your monthly bills. You just need to create categories for them. For example, you can have a groceries category, utilities category, entertainment category, etc. You know your expenses better than anyone. Just categorize them and viola!
Label your envelopes
Label your envelopes according to the categories you have created. Each category of expenses should have an envelope.
Withdraw cash for your envelopes
After you have created a budget you know how much your expenses add up to. You need to withdraw cash for each category you have created above.
Stuff your cash envelopes
Put the money you budgeted into each labeled envelope.
Use the money for that category only
You can only use the money allocated for each category. The categories do not overlap. For example, you should not use the money for groceries or utilities.
Stop spending when the money runs out
In this step, you need to stop when the money runs out of your envelope. You can only use the money for the allocated expense. If one envelope runs out while the other still has money, you do not borrow from the other.
Keep track of your spending
Make sure you keep all the receipts for your purchases and bills. Know exactly where your money went.
Reflect
In this last step, you reflect. You look back on your spending and analyse your financial movements. In which category did you overspend and run out of money? Which category did you over budget? How can you do better next month?
I hope you found this article helpful. Budgeting can be tricky but you’ve got this. Personal finance is a journey with bends and turns but you will strive. It takes patience and dedication to achieve financial freedom.
sources: Dave Ramsey's envelope systems