By Nicole Long

Nicole Long is a freelance writer with expertise in economics, business and personal finance. Nicole blogs via Contently.com.

Budgeting isn’t the stuff dreams are made of, but it is a necessary part of running a financially stable household. Doing without is like to not checking the gas gauge before you embark on a road trip. It just doesn’t make any sense.

A budget serves as your financial compass during difficult times; it is also a constant reality check. You can lie to yourself and pretend that living without a budget works for you, but sooner or later you’re going to fall off a financial cliff.

Budgeting doesn’t have to be difficult. Choose a simple concept, such as the envelope system, and run with it.

The “Envelope System”

Take some tips from budget guru Dave Ramsey and focus on a simple way to pay bills while creating a savings plan. Not a new concept, the envelope system is meant to help you get your finances in order, prevent overspending and tackle your debt.

This system requires that you follow a cash-only lifestyle, as much as possible, by using envelopes to set aside money in each spending category in your budget. You can leave automatic payments set up to be withdrawn from your bank account and continue to pay bills online, but the goal is to put the debit and credit cards away to avoid discretionary or impulse spending.

Baby Steps

You must sit down and do a complete budget for this to work. Use a budget worksheet, like one from Kiplinger, to help create an accurate and detailed budget.

Your budget should provide you with an idea of how much of your money needs to go toward paying bills and how much is leftover for variable and optional expenses, such as groceries and entertainment. It should also make it easy for you to determine how much of each paycheck will need to go toward each expense.

Envelope Madness

At this point, it’s time to get your envelopes set up. Each category in your budget should get its own envelope. For instance, you should have one envelope for groceries and one for gas.

Each paycheck will need to be budgeted accordingly. Leave enough money to cover your automated bills in your bank account, withdraw the cash for the envelopes and move the remainder into savings.

Keep in mind that you will need to fill the envelopes based on your pay schedule. So, if you get paid bi-weekly you will need to adjust the amount put toward each monthly expense to match. For instance, if you envision spending $200 a month on gasoline, you would put $100 per paycheck into the gasoline envelope.

The Hard Part

Now that you have your envelope system in place, it’s time to stick to it. When the money in the envelope is gone, consider yourself out of money for that category. You can’t use your debit card or credit card if you see a great handbags or pair of shoes on sale. You may also to get creative in the kitchen, making do with supplies you already have. However, in the long-run your savings
and financial health will be thankful for those little decisions.

Adjustments are a natural part of the process. If you budgeted too much for clothing but not enough for groceries, put less toward clothing in the future. If you find you have money leftover in your envelopes at the end of the month, move it into savings or put it in an emergency fund.

In the end, it’s all about living within your means and putting simple ideas to work for you. The little decisions you make today can result in big payoffs in the larger financial picture.