How to Use Envelopes to Keep Your Spending In Check During These Tough Times

In these tough times of strict buhari-nomics, every kobo counts. Most people are starting to realize the importance of budgeting their expenses and accounting for every kobo they spend.

Some people have built the habit of budgeting but often times find themselves spending more than they have budgeted for. For example, you always buy Lipton Green Tea, but your co-worker gave you one fancy “Raspberry and Apple sliming tea” last month. While doing your grocery shopping for the week you saw the tea in the supermarket and bought it, even though you already have your tea supply for the month. Oh, and the tea costs three times the price of the regular green tea you normally purchase. There’s still money in your bank account, so no wahala.

I’ve fallen victim of this, so many times. Sometimes, it’s my groceries;  other times it’s driving somewhere I shouldn’t be driving to… knowing that I will need to spend more money than I budgeted to fill my tank for the next week. Because times are hard now, I started researching how to ensure that I do not spend more than my budget and I came across the cash budget system. I have been practicing this for a while now and it has definitely helped reduce the amount of times I overshoot my budget.

To take better control of your spending and ensure that you don’t overshoot your budget, below is how to do the envelope budget system:

Write down your budget
Identify all your fixed and variable expense categories and allocate a specific amount to cover each of the various expenses for the month (e.g. Internet: 10,000 Naira, petrol: 20,000 Naira, emergency funds: 50,000 Naira, etc.) and have a figure for your total monthly expenses.

Buy a pack of envelopes and label them for each expense category
Write down all your monthly expense categories boldly on the front of each envelope (e.g. envelope 1: petrol, envelope 2: groceries, envelope 3: gym membership, etc.)

Visit the ATM or bank to remove your total monthly expense

When you get paid, remove the total amount of your expense for the month and put in each envelope the amount you budgeted.

If you budgeted 40,000 Naira for groceries (10,000 Naira weekly) for the month, you’ll put 40,000 Naira in the envelope. On grocery day, you will remove only 10,000 Naira you will need to shop for that week. This way when you get to the grocery store, you will not fall victim of buying expensive tea you do not need to buy. If your groceries turn out to be 10,500 Naira, you have to remove something from your shopping bag.

Also, during the week, the grocery envelope will be left in your house… since you do not need to shop for groceries during the week.

Never use money from one envelope to pay expenses in another expense category
Do not use money from one envelope to pay for something else. If you see that you’re running out of petrol money, maybe hitch a ride with your colleague to work for the rest of the week. Don’t go into your groceries envelope to take money for petrol. If you find that you’re always running out of money in one particular envelope before the month is over, then you’re probably under budgeting and you need to increase your allocation to that expense category. You may be overspending, and you need to curb your spending. For example, if you budget 10,000 Naira for credit for the month, but you find that you always need to buy more credit in the middle of the month, then you’re probably under budgeting for credit. You need to reduce how much time you spend on the phone.

Reward yourself
If you have money left in an envelope at the end of the month, reward yourself and treat yourself to something nice! However, if you find that you always have extra money in a specific envelope at the end of the month, then maybe you’re over budgeting for that expense category and you need to reduce how much you allocate to that expense category.

Yes, there are some expenses that you may not be able to pay for with cash but for those that can be handled with cash you should try it. You are less likely to overspend with cash, because the process of handing over cash is more personal than swiping a card; you actually see the money leaving your hands.

It is important to note that the envelope budgeting system is meant to build discipline and better tracking of your expenses, not magically make your expenses disappear. If you’re not disciplined, whether you use the typical budgeting apps or envelope budgeting system, you will continue to struggle with overspending and managing your money.