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How to Save Money with the Envelope System

Saving money with envelope system
– Income: The money we get for work we do
– Expenses: The money we spend on things we need
– Necessities: Things that we absolutely cannot live without [the bare minimum include food, clothing, shelter (and today, the Internet)]
– Luxuries: Things we can or cannot afford, but still end up spending on, simply because we have the means – plastic money
– Debt: What we find ourselves in because we cannot (or do not want to) decipher the difference between necessities and luxuries
– Financial Crisis: What happens when our debts continue to mount due to excessive spending on luxuries
– Breakdown (Financial, Emotional and possibly Physical): The result of ever-increasing debt and no means to repay it

This is the probable series of events that you may find yourself in if you’re among the millions who have the question, “Where did all the money go?” on their minds at the end of the month, or use “What are credit cards for!” as a retort when asked why they want to buy that unnecessary scarf or golf club. It may seem very harsh and insensitive to say it, but the truth is that most of us avoid facing the reality of the dire straits that our financial lives are in. We want to seem like we have it all figured out, but the truth is that we’re in denial. We deny that we have a spending problem. We deny that we don’t like to plan our finances. We deny that we buy stuff we don’t really need. We also deny that we need help. All that ends today! Thanks to the Envelope System that’s been brought into the spotlight by Dave Ramsey, you can learn to have your finances control you rather than you letting them flow down the drain (read: swiping that piece of plastic ever so frequently). Here are the simple steps that you need to follow for a frugal, yet fruitful living. You’ll need:

– Envelopes (number depends on items mentioned in step 1)
– Pen or pencil
– Notepad

Step 1
Fix a Budget

The word ‘budget’ has come to have such negative connotations that people simply don’t want to use it anymore. A budget is “the money that is available to a person … and a plan of how it will be spent over a period of time”, as per the Oxford Dictionary. It’s a seemingly harmless, yet extremely loaded word. The first step towards managing your spending is having a plan of how much money you have and how you need to spend it, not intend to spend it. How to do this? First, in the notepad, make a note of the amount of money that is due to come in. Using this as a base, make a list of all the assured expenses you have until the next inflow of money. For instance, your income is USD XYZ. From this XYZ, subtract fixed expenses, like mortgage/rent, food, cable, fees, phone, and other bills, etc. If these figures are not fixed, take an upper limit and write it against the item.

Step 2
Make Envelopes for Each (Fixed) Item

Once you have the breakdown of the expenses, you have to physically divide the money into different sections. Then pick out an envelope for each item. Write the name of the item on the back of the envelope along with the amount of money you’re putting in it. Put only the allotted money into the envelope. Repeat for all items on the list and keep these aside.

Step 3
Make One for Emergencies and Contingencies

Your son hurts himself and you have to rush to the ER; your car breaks down and you need to have it towed―you can never predict when such things will happen. Hence, it is important to keep some money aside for them. So, mark another envelope for emergencies, and put the assigned amount into it.

Step 4
Keep Some Fun Money Aside

After deducting the amount assigned to emergencies, whatever money remains, you take a call on how much you want to keep aside for yourself, just for fun. You may find your dream purse or the perfect tool kit on sale! Don’t let a money management plan get in your way. Keep an amount aside for such opportunities right at the start, so you know that you can afford it, thus, avoiding the guilt that accompanies impulse shopping. What if the amount assigned is insufficient for this dream purchase? Simple, don’t buy it!

Step 5
Don’t Overspend

The success of the Envelope System is solely in your hands. The key to making it work is resisting the temptation to overspend. The whole point of assigning an amount to every single thing that you could possibly spend on is to make sure that you don’t overshoot that amount. So, once an envelope is empty, you know that you cannot afford to spend more money on that particular item. If the money’s gone, it’s gone. Do NOT steal from another envelope, not even the emergencies and contingencies one (unless the situation you’re in fits your description of an emergency or contingency).

Step 6
Make Way for Savings

If you do abide by all the steps given above, chances that you’ll have some money to spare are more than high. How? Well, let’s see:

✔ When you allot a budget to yourself, you’re making a promise to yourself that you won’t spend more than that much on an item.
✔ As a result, you begin to pay more attention to whether you actually need the item.
✔ If yes, the next thing you look for is whether there are inexpensive alternatives available.
✔ If yes, then great! If no, then you’ll begin to look for items that you’ve included in the list, but can be postponed for the time being.
✔ Thus, you have already budgeted that amount to the item for the next cycle (so don’t forget to add this amount there).

When you do this for everything, you’ll realize how much extra money you spend on things that you think you need, but don’t.

Be honest with yourself when using this system and you’ll see that its effectiveness lies in its freakish simplicity. You allot money to an item, you use it on that item, you keep some aside for a rainy day, and have fun with some. That’s all there is to it. Don’t be discouraged if this stringent method doesn’t work its magic instantly. Give it a couple of months, and you’ll surely reap its rewards!

Tips to Save Money on Your European Vacation

What a good traveler needs is a nice, cozy place to stay which isn’t too expensive. The presence of a clean bathroom is nice. Home-grown restaurants that offer lip-smacking local cuisine at reasonable prices are appreciated. And yes, internal transport that doesn’t leave him broke before the trip ends.

As you can see, a budget traveler’s demands clearly are quite budgeted. He doesn’t yearn for a seven course meal at Maxim’s, neither does he think of staying at The Dorchester. If you’re thinking along the same lines, we’ve got you a set of tips that will help you enjoy Europe in all its glory, at a fraction of the cost.

5 Ideas to Save Money on Your European Vacation

Time Your Trip Well

– Give the summer a miss.
You actually imagine yourself spending a gorgeous summer in Europe, with the sun shining down, and the perfect weather. Unfortunately, so does the rest of the world, which is why it is rather costly to be on this continent from June to September. As far as air travel is concerned, you might mistakenly assume that booking on a weekday will always come at a cheaper fare. The cost of your plane ticket depends not only on the day you travel, but also the time of your flight, the layover time (if applicable), and your carrier. Therefore, pay close attention to all these factors while booking your ticket. For all you know, you may get an excellent deal over the weekend as well. Another misconception goes that travel agents can get you lower rates owing to the fact that they book in bulk. But frankly, they earn their profits from commissions paid by you, when you book through them to avail “discounts”. Your best bet, therefore, remains to contact the airlines and the hostels/hotels directly.

+ Choose to go off-season instead.
Planning the holiday during the off season, say early winter or spring does have a lot more perks than you’d imagine. First, it’s obviously cheap. Second, you won’t encounter the jostling crowds. Third, you’ll welcome the slight nip in the air, as the European summer gets sweltering each year. Fourth, airlines give you humble fares and upgrades. Fifth, rooms are available at throwaway prices. Are you getting the drift?

Plan with Precision

– Resist the lazing.
You’re tempted to go with the flow and explore Europe at a languid pace. It sure sounds nice when you have a wad of cash stashed in your pocket. But if you’re looking to save money, you will have to give a miss to the aimless wandering.

+ Go for efficiency.
You’d rather plan, as this will allow you to fix an itinerary, and make use of the wonder that is Eurail. They offer some amazing deals on the cheap, so you don’t have to be constantly worrying about how you’re going to travel on the continent. Also, try to book night journeys for long distances, as it will save you time, and cut down on the staying expense. Many of you trying to save money may also consider hitchhiking as an option. Though quite unreliable, it will take you from one place to the other at a minimal cost. Keep in mind that when you’re hitchhiking, you can’t afford to have a fixed itinerary in place. Always remember not to be very rigid with your itinerary, as you will find cheaper options to travel within the continent as you go along.

Save on the Stay

– Chain hotels are getting cheaper, you know!
Sure, they are. But what they cut on rates, they add in taxes, so the best thing would be to avoid them. You don’t really need to pay USD 50 a night to get a mint chocolate on your pillow, do you?

+ Think B&Bs, house sitting, YMCA, hostels, and the lot.
The best thing about Europe is the sheer number of staying options it has for budget conscious travelers. Family-run hotels are quite cozy and clean, and they come with the added advantage of interacting with the locals, who will be quite willing to offer more tips on saving money. If you choose to shack at any of the hostels, ensure that you book in advance, and be sure of the facilities before you land there. Talk to someone who’s lived there before, to get an accurate idea of the living conditions.

Know About the Freebies

– Freebies are only aimed at students.
True, a lot of them are indeed for students. For instance, students can avail passes which lets them get inside museums and attraction for almost nothing. But that’s not to say that there isn’t anything for the slightly older ones.

+ We’re talking city cards, bus passes, and more!
Europe thrives on tourism, so it is only fair that they discount it a bit. Several of Europe’s biggest attractions including London, Paris, Rome, Berlin, and Madrid offer passes that let you travel on the cheap using public transport. They also have city cards that give you discounts on entrance fees at monuments and museums. Some even offer discounted meal tickets. Check the tourism websites for individual cities to know more about such offers.

Go for Cheap Chow

– So much to see, and so much to eat!
Both of which can be quite expensive. Being a tourist, you’re bound to hover in the touristy areas, and you’d obviously be tempted to grab a bite at the fancy places that surround you. But don’t.

+ You can revel in the deliciousness for less.
Most European towns have market places that sell fresh produce like fruit, breads, and even roasted meats. Of course, these won’t cost you a fortune. It also lets you savor the region’s cuisine and flavors to your heart’s content. Quaint little restaurants and cafes situated away from busy areas also offer a homely experience. And before I forget, European chocolatiers are quite generous as well, so enjoy the sampling before you make your purchase.

Saving money on your European vacation involves doing stuff that takes a detour from all things conventional, but is worth it. But don’t be so hung up on saving money, that you compromise on having a fabulous trip in Europe. Don’t forget to have a great time while you’re there.

How to Save More Money

Cut the Expenses
Cut expenses
It is simple logic! Cut down all the unnecessary expenses and soon, you will be saving much more money. A good idea to do this is to prepare a list of items that you need before you set out shopping and then stick to the list! If you are staying at a bigger flat, consider renting a smaller one. Likewise, cut on your telephone bill, entertainment expenses, give up any membership of a club or a gym that you have but not used for ages, keep only one credit card, etc.
Make a Monthly Budget
Inculcate the habit of making a budget every month, listing all your expenses and incomes. During budgeting, ensure that you save at least fifteen percent of all your income. This way, you will know that you have only an X amount of money to spend, as the rest has to be saved for the future.

Pay Cash
If plastic money has made shopping convenient and safe, its biggest drawback is that we do not think twice before buying something which is way beyond our means. To save more money, it is suggested that you make most of your payments through cash. This will ensure that you do not buy something for which you don’t have immediate cash available, thus saving a lot of money for you, which you would have otherwise paid as interest on credit card installments.

Cook at Home
One of the ways to save extra money is to cook and eat food at home. If you ever calculate the amount that you spend on eating out, you will be amazed that collectively it runs in thousands of dollars per month. So one of the tips for saving money and also for a healthier and hygienic diet, start cooking on your own at home!

Shop Intelligently
Another money saving tip is to shop from places where you get discounts and good deals. You can buy grocery in bulk and look out for discounts when you buy clothes. You can even get good deals in thrift stores, yard sales, stock clearance, garage sales, second-hand goods shops, end-of-season sales. Websites such as e-bay offer a cheaper and convenient alternative for buying stuff. Also, stop impulsive shopping; do not buy stuff you want but don’t need.

Save on Electricity
By conserving energy, you are cutting your expenses and at the same time contributing to save the environment from global warming. Make sure you switch off the lights, fans, TV and all other electric appliances when not in use. Buy energy efficient electrical appliances, use devices which operate on solar energy, lower the thermostat in your house by two degrees during winter season, and raise it by two degrees during the summer season.

Use Public Transport
A good idea is to travel by public transport. If the distance to be covered is less, you can even walk down, instead of spending money on filling gas in your vehicle.

Earn More
If you feel that you need to save much more than what you are doing right now, supplement your current income by taking a part-time job. You can even think of making more money by starting your own home based business.

Invest Properly
Investing wisely is very important so that the money does not lie wasted in bank accounts. Cut down on your expenses and increase your avenues of income generation, and invest wisely in real estate and long-term schemes for a safer future.