How to Make a Budget: Securing the Allocated Funds

In step1, I shared to you how to determine "ALL" the areas in you life where your income goes. The most important thing to take note here is the word "ALL".

In step2, I shared to you how to allocate the right amount of funds for each area. The important thing to remember here is that the sum of all allocations must not be more than your take home pay. If you need to tweak your allocation -- reduce something here, change something there -- then feel oblige to do so.

The hundred-dollar question is, "Where are you going to place the allocated funds?"


STEP3: SECURING THE ALLOCATED FUNDS

Buy small white envelopes. Label each envelope with the name of the area where the money will go. For example,

"God Works" envelope
"Savings" envelope
"Rice" envelope
.
.
.
"Recreation fund" envelope

It is in these envelopes where you will put your allocated money. We will call these envelopes our E-bank.

To remind you of the amount of the allocated fund, and to help you trace your envelope deposits and withdrawals, let's put a piece of paper inside each envelope and write the following:

(1) The amount of the allocated fund (only once preferably at the topmost)
(2) The date and amount you deposited (per transaction)
(3) The date and amount you withdraw (per transaction)

Religiously fill-in the papers for every transaction you made to your E-bank. This will help you in the future to trace your money just like a bank book does. Put the envelope in a safe place preferably where there is a lock.

The next important question is, "When is the best time to pay or to make a deposit to your E-bank?"

VERY IMPORTANT1: Pay your E-bank as soon as possible right "after" you receive your salary, income, commission or sales; and right "before" you make any expenses. This way you will spend based on your budget.

VERY IMPORTANT2: Avoid using the money from one of your E-banks to pay something that the money is not intended for. For example, do not use the money in the children's tuition fee envelope to pay your electric bill. You will be courting confusion here later on, and this defeat the purpose of the system.

PS: I can assure you that this system works because I've been using this for about 8 years now and so far, with God's grace of course, my finances is in order. But I can also assure you that this will not work with you "IF" you do not discipline yourself, and maintain a strong desire to put your finances in order.

PS: If you want to know more how to save money, how to avoid debt, how to get out of debt, and how to make a budget then click HERE. This is the home page of my blog where I shared my knowledge and experience in budgeting, expense tracking, financial planning, and making a budget that is not only doable but I actually proven for 8 years. I also shared tips, which I actually use regularly, on how to save money, where to save your money, and in the process you will know how to avoid debt. Learning to avoid debt is easier than getting out of debt so I put more emphasis on staying out of debt. As a bonus, I also assembled information on how you can make your own financial planning and budget software. To get all this information for free, please click HERE.

PS: I am interested to know if you find this article helpful so please feel free to drop some comments.