Consistently updating a ledger or spreadsheet makes budgeting cumbersome and complex -- plus, it's unnecessary. After determining your monthly income and your expenditures, creating a budget proves a simple task. Your checking account houses the funds for fixed expenses, while the envelope system helps you manage your variable expenses with ease. Once the money in an envelope disappears, you simply stop spending in that category until you replenish the money in the following month.
1. Collect all your receipts for one week. Keep them to help you find out how much money you spend per week on entertainment, clothing, fuel and food.
2. Make a list of all fixed expenses, such as your house payment or rent, utility bills, car payment, cable or satellite television, Internet service, cellphone charges and insurance. Include other loan and credit payments. Add all of your fixed expenses together and write down the total.
3. Create a list of all of your other expenses, such as groceries, fuel, entertainment and clothing. Look at the collected receipts to find weekly amounts for these expenses. Multiply the total weekly expenses by four to get a total that roughly equals the monthly amount you spend.
4. Add your fixed and other expenses together. Subtract the total from your monthly net income. For instance, if your monthly net income equals $3,000 and your total expenses equal $2,300, you have $700 left each month.
5. Write categories on four or more envelopes. Include "Entertainment," "Clothing," "Fuel" and "Groceries." Place the amount of money you determined in your calculations in each envelope. Include an envelope marked "Emergency" and add at least $200 to it in case you need it. Place the envelopes in a secure place within your home. Retrieve the money as you need it.
6. Leave the money allotted for fixed expenses in your checking account and pay your bills from there. Move any extra money to a savings or investment account, so you won't spend it.
- Reduce your expenses for nonessential products and services if you find that you have little or no money left over after subtracting your monthly expenses. For instance, if you generally spend $150 per month at restaurants, reduce the amount to $50 per month.
- Write the amount of money needed for each category on the outside of each envelope for easy reference each month.
- Avoid using credit cards to extend your monthly budget or you may rack up debt.
Items you will need
- Pay stubs
- Savings or investment account
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