A Envelope System That Will Help Keep You From Overdrafting Your Checking Account

by Erik Folgate  
Filed under Budgeting, Random

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I don’t know what the deal has been this past year, but I have had a couple of occasions where I overdrafted my checking account.  One of those occasions was my forgetfulness that banks make it virtually impossible to “float” a check anymore.  You have to just assume that the money is coming out the next day if you write a check now, because there is much lesss wait time for it clearing your account.  The other occasions where I overdrafted was my utter reliance on the debit card.  I use my debit card like it’s a microchip embedded in my finger.  So, I need a way to stop this madness, because I’d rather saw my arm off rather than pay another $33.00 to Bank of America.  I am going to start a simple envelope system.  All “out on the town” money is going to be in an envelope to be used throughout the month for four different categories. 

1. Food/Toiletries/Household items
2. Entertainment/Fun
3. Clothing
4. Gasoline

If you budget out these four items, and set aside the money in four different envelopes, then you will have a much less chance of having to worry about that debit card purchase that you forgot to write down in your checkbook.  It also helps you stretch the money better, because you can see that you only have X amount of money left for food for that month. 

My hope is that you do not scoff at this idea of a primitive envelope system.  Even if you are so financially savvy that you have everything accounted for penny for penny in Quickbooks, you will always have those times where you spend a little too much or you just forgot about the 25 dollars at the movie theater or 10 food purchase.  Some of you may have enough money in your checking account to not have to worry about ever overdrafting, but if you are like me, young and broke, every purchase matters –  especially on those paycheck periods where you have to pay your rent/mortgage.  For safety purposes, you should probably keep the separate envelopes at home and take the money out as needed.  There’s no need to be carrying around four envelopes of cash in your purse/wallet.  Try it out and see how it works for you.  If any of you are currently using a similar budgeting method for on-the-fly purchases, then I’d love to hear your comments. 

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