Budgeting Basics 4: Staying the Course

Over the past few months, we've looked at the basics of budgeting. Starting with why you need to budget, we moved on to tracking your spending and setting up category limits.

The final piece of the puzzle is how to stay the course — that is, how to actually implement your budget. Here's an overview of several common methods used to stay on budget.

1. Envelope system. This is the most basic, and perhaps the best way for beginners to stay on budget. As the name implies, with this system you track your spending by depositing money into regular mailing envelopes, and then taking from those envelopes as needed.

At the beginning of the month, withdraw enough cash from your savings to cover all the predetermined expenses that you plan to pay in cash (or withdraw half the amount now and half in the middle of the month).

Cash spending typically covers expenses from categories such as food, clothes, and entertainment that don't lend themselves to being paid by check or an automatic withdrawal. Categories such as housing, car payments, and insurance would not be included as part of an envelope system.

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