Before I begin, I would like to quickly extend my congratulations to you for reading this article.

 

Why?

 

The reason is because after many years of study and observation, I’ve found the people who are financially stable are the ones who put together a smart budget for their lives. If you’re reading this, then you’re one of the few who are proactively making a change to your finances.

 

How Putting Together A Smart Budget Has Changed My Life

Several years ago, when I was broke and had nothing in the bank, I found it completely frustrating to not be able to afford the basic things I wanted. I also had a lot of bills that I couldn’t pay. I was completely stressed with money problems and developed insomnia from the amount of stress I had.

 

It was a terrible time for me. I felt like I hit rock bottom.

 

It wasn’t until I finally decided to finally learn how to manage my money properly and somehow get ahead in life financially.

 

I therefore went to the library and started reading books on finances and how to put together a budget. To be honest, most of the books out there were just too confusing. They had statistics, they had graphs, estimates and projections. I had no idea what I was reading.

 

Being a beginner to managing money, I needed a system that was quick and easy to implement a smart budget that would turn things around.

 

I once heard a powerful quote that really stuck with me forever.

 

“It’s not about making money, it’s all about managing it”

 

That quote is so true because I personally know people who are earning over $100,000 per year and they save nothing at the end of the year. I know people who are earning $30,000 per year and they are saving $10,000 per year.

 

What’s the difference? It’s through their management and budgeting of their finances.

 

The Results From My Envelope Budgeting System

After implementing my own budgeting system that managed my finances extremely well, I was able to save nearly $30,000 in the course of 2 years. I went from broke to saving a fortune.

 

With the money saved, I invested half of it into buying a house and the other half in traveling around the world.

 

I couldn’t believe how far I went from simple budgeting.

 

In this article, I’ll show you how I did it.

 

Introducing My Envelope Budget System

What I will show you is my own personal system that I use to manage my finances when it comes to receiving cash. If I don’t receive cash, I still withdraw the amount from my bank account and manage it then.

 

Of course, you can set up this system online, however it really gets a bit tedious to manage it all online.

 

This smart budgeting system has the following benefits:

• It’s cheap to set up.
• It’s easy to set up.
• Requires a pen, paper, envelopes and calculator.
• Done

 

Before I explain further, a word of caution. This system is VERY simplistic but VERY powerful if you implement it.

 

I’ve created a simple example for you, however your numbers will of course vary depending on your circumstances.

 

4 Steps To Managing Your Money

Step 1. Work out how much you earn.

The first step is to take out a piece of paper and pen and write down at the top of the page how much you currently earn per week. So if you’re earning $2,000 per month, you’re dividing it by four and now you’re earning $500 per week.

 

Weekly Income

[Income Per Week] = $500

 

 

Step 2. Work out all your expenses.

The next step is figuring out how much all your expenses are and also list them into particular categories. If you are billed each month, you’ll need to once again divide the total of that bill into 4 so it’s per week. For example, let’s say that your water expenses is $50 per week and your electricity is $40 per week. Those two expenses would fall into the house expenses and so forth.

 

Here’s an example.

 

Weekly Expenses

 

[House Expenses]

Water = $50

Electricity = $50

Total = $100

 

[Bills]

Phone = $10

Internet = $10

Total = $20

 

[Other]

Groceries = $80

Weekly Budget = $100

Total $180

 

Total Weekly Expenses = $300

 

By looking at the above budget, we can see our total expenses is $300 per week and that will cover everything to survive. Just $300 per week.

 

We can also find out our CASHFLOW which is $200 per week (Income – Expenses = Cashflow)

 

CASHFLOW is VERY important to know because it gives you an idea about how much cash you have left over to play with. If your cashflow is very low such as $5, you don’t have that much cash left over as a backup when unexpected expenses arise.

 

Step 3. Pay yourself first.

This is the critical step. Pay yourself first. When you are forming your budget, many people think of saving their money AFTER they pay all the bills. NEVER do this! You’ll never get ahead.

 

What you need to do is as soon as you get paid, you want to sock away a certain amount into savings FIRST and then live on the rest. Trust me, you must do this.

 

Looking at the above budget we have a cashflow of $200 which is very good.

 

I would actually save $100 every time I get paid and the other $100 would go into a buffer zone for saving for holidays, gifts and other things.

 

Step 4. Create the envelopes.

Now you’re ready to start putting it all together.

 

What you do now is take out a set of envelopes and write down each category name and its weekly expenses. Here’s an example.

 

[House Expenses] $100

 

[Bills] $20

 

[Other] $180

 

[Savings] $100

 

[Buffer] $100

 

Now every time you get paid, you receive the cash and immediately put them into it’s destination so it’s ready.

 

Whenever your bill were to arrive, you simply dip into your envelope and pull out the required cash. It’s simple, it’s easy and it’s effective. All your bills, groceries, savings and other expenses are all taken care of. Just follow whatever is written on the envelope and put the cash into it.

 

 

Try My Envelope Budgeting System

The great thing about this system is that it’s so easy to implement and very basic. You don’t need to think, you don’t need any software and it works every time.

 

I normally tweak my envelopes here and there but most of the time, the planning is already done a year prior and I don’t really need to change much. I once was using the same system for 3 years without changing anything. I spent around 1 hour planning and setting up the envelopes and was living comfortably for 3 years!

 

Try it, it will change your financial life.

 

Good Journey.

 

Khoa Bui