Can’t manage your money? | This simple budgeting method is your best solution

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It’s no secret that the concept of money — and everything that goes along with it — can definitely be confusing, intimidating and certainly overwhelming.

But I want to make something very clear: You do not have to be an expert to be good with money! I can promise you that, because I’ve witnessed it more times than I can count.

In fact, anyone can be good with money — you just have to start paying attention and find a method that works for you.

Regardless of how much you have or how much you know, successful money management requires you to master two simple habits: diligence and organization.

If you can stay on top of things, you can get on, and stay on, the fast track toward financial freedom.

RELATED: 6 easy money tips for people who are forgetful or unorganized

Why you need a budget

How often do you reach the end of the month and realize you spent the money you had planned to save? How often do you reach the end of the month and have no idea how much you spent?

If this sounds familiar, you aren’t alone. People ignore what’s going on with their money for a variety of reasons — whether they don’t want to face it, don’t think they make enough for it to matter or think they can always deal with it later — whatever the reason, it’s just an excuse. And it’s holding you back from being in control of your own life.

Budgeting isn’t about taking away, it’s about adding freedoms to your life

Contrary to popular belief, budgeting isn’t actually about restricting yourself and never having fun — it’s just about understanding your money, so you can make smarter choices in life.


Simply think of your budget as a tool — a tool that allows you to stretch your paycheck as far as possible.

Having a plan is the only way to take, and maintain, control of your life, because being in control of your money is the only way to be in control of your own choices and future.

And that plan needs to give every dollar a purpose — because without any idea of how much you’re spending and what you’re spending on, you end up wasting a lot of money that could be piling up in savings.

Bottom line: Nothing is going to change until you decide to start paying attention to your money — how much is coming in and how much is going out. Because if you don’t, you will very easily reach a point when your lack of interest prevents you from doing the things you want to do, when you want to do them — and that’s not a pleasant situation to be in.

Believe me, I’ve been there. And it sucks.

So if you’re struggling to get a handle on your spending and saving, there’s one simple solution that can get your budget in order and boost your money management skills pretty quickly — and it’s called the envelope method.

RELATED: How to change the way you think about budgeting

The Envelope Method: A cash-only budget

If you have a hard time managing your money and actually sticking to your budget, using the “envelope system” may be a great solution for you.

The thing about cash that makes people change their habits is the tangible effect — actually feeling your wallet (or envelope) getting thinner. Plus, handing over your last $20 bill for the month is a lot harder than just swiping a card.

Using a cash-only budget will help you quickly get a better understanding of not only where your money is going, but also how much you’re wasting each month on unnecessary expenses.


How the envelope method works

  1. First, make sure to keep enough cash in your checking account to cover any recurring bills or other monthly payments you pay by check or online.
  2. Next, figure out exactly how much cash you have coming in and how much is going out each month. Here’s a step-by-step guide on how to do that.
  3. Once you know how much money you have each month, you then need to figure out how much you should be spending on each category of your budget.
    1. Fixed costs: These are the bills that cost (roughly) the same every month. You want to spend no more than 50% of your take-home pay on these expenses. A few examples: Housing [no more than 30% (ideally 25%) of your income should go toward housing], utilities, insurance, cell phone bill, legal obligations (minimum student loan payments/car payments/debt payments etc.) and subscriptions. When you add up all of your fixed costs for each month and the total is more than 50% of your take-home pay, it’s time to shop around for better rates and deals.

    2. Goals & savings: Try to set aside at least 20% of your take-home pay for your goals and savings. This could be paying down high-interest credit card debt, saving for a house, retirement savings etc.

    3. Flexible spending: Spend no more than 30% of your take-home pay on these expenses. This category includes all of your expenses that vary month to month. You want to spend no more than 30% of your take-home pay on flexible spending ‘ so things like eating out, groceries, entertainment, shopping, gas etc. Food is obviously a “need” in life, but there are ways to reduce how much you spend on food, so it’s not a fixed amount every month.

  4. Next, reevaluate your spending and create a budget that will allow you to get ahead of your money and take control.
  5. Once you make sure there’s enough money in your checking account to cover recurring bills, then go ahead and split up the rest of your paycheck/money/budget into separate envelopes of cash.
  6. Each envelope represents one area of spending — so if you’ve budgeted $500 for groceries each month, then put $500 cash into an envelope labeled “groceries.”
  7. Then do this for all of your other monthly expenses (eating out, shopping, entertainment etc.).
  8. Use the envelopes to keep track of exactly how much you’ve spent and how much you have left for the rest of the month for each part of the budget.
  9. Also, make sure you budget for savings. Set up your direct deposit to send any extra money you can spare automatically into your savings account so you won’t be tempted to spend it.


The idea is to challenge yourself. Sticking to the budget may not be easy at first, but it will help you better understand and manage your money so you can take control of your financial future.

After implementing this strategy, you’ll quickly find yourself rethinking a lot more purchases — as handing over a $20 bill (when the envelope is getting thinner) will be a lot more difficult than just swiping a card.

A digital alternative

Instead of using envelopes, you can also set up your direct deposit so that certain amounts of your paycheck are sent to different accounts. For example, you could have three or four checking accounts and one savings account — and then have your paychecks automatically split the money you’ve budgeted for each category among these separate accounts each month.

Tracking your spending

In order to eliminate wasteful spending, you have to track every expense and purchase, whether it’s using cash or an app that does it for you. Swiping a debit or credit card will no doubt cause you to spend more than you should, so tracking where every dollar is going will help you develop even better habits and save even more over time.

Here’s a step-by-step guide to creating a budget and resources to help you keep your money on track.

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