Tomorrow is a new month so let’s do a money management challenge, the April envelope challenge! This is perfect if you feel a bit stuck with your personal finances, if budgeting just isn’t that much fun or if you want some change and excitement in your financial life.

The Concept

Let me explain the whole concept. The Aprils envelope challenge is very simple, you need one envelope for each expense category you have, for example food, clothes, eating out, hobbies and so on. Then you will put the amount of money that you have budgeted for the category in each envelope. Throughout the month you will only be able to spend the money you have put in the envelopes.

This envelope challenge will give you 100% control over your spending, if you follow the rules you physically can’t spend more than you have budgeted for and you are therefore guaranteed to stay on budget and have the wanted amount of savings at the end of the month. Throughout the month you will also engage your mind in a different way of thinking since more planning will be required and you need to put more thought behind your purchases. Living in the days of bank cards where money is just invisible numbers swiped away, you will be able to get more in touch with your money in this challenge.

This is a great challenge to try out if you want to explore different mind-sets about how to spend, save and budget and could be one step on the way of finding your style in personal finances. What are we waiting for, to get started read the step by step guide below. The last step is my personal favorite.

Step 1. Budget Your Expenses

If you haven’t already budgeted your expenses for one month this will be your first step. Calculate your total income for one month and then divide it over different expense categories that are relevant in your life, for example food, clothes, transportation, eating out, hobbies and so on. Don’t try to allocate all the income in a category just for the sake of doing it. You should think about how much do you reasonably want to spend within each category, then make sure the total amount is not more than your total income. Ideally you should plan to have some savings as well.

It is not necessary to make an envelope for fixed expenses that will be a bank transaction, like rent or electricity.

Step 2. Withdraw Money

Next step is to withdraw money and put it in your envelopes. We might have to withdraw in several rounds to get the bills in the right amounts or if we have a withdrawal limit on our bank card. You will not spend all your money the first days of the month so don’t worry, adjustments can be done during the first week to get the right amount. Just keep track on how much should be in the envelopes, how much you’ve already put in there and how much you’ve spent.

The amount that you budgeted to save should be transferred to your savings account or where you usually save money. It is also fine to keep them on your normal bank account if you don’t have a savings account, but only if you can control yourself and not fall into the temptation of spending them.

Step 3. Spend

You are only allowed to spend the amount of money that you have put inside the envelopes this month. When there is no more money, there simply is no more money. It means that you need to plan how much you spend and when you spend it to ensure you can put food on the table at the end of the month. You obviously can’t walk around with all your money in your wallet everywhere, to manage this it will be required from you to plan ahead and estimate if you’ll need money and how much when you leave the house. It’s a great way to have control over your money and avoid spontaneous shopping which can be lethal for your budget.

Feel free to be creative, if you’re running out of money in your food envelope it is okay to take money from your clothes envelope (not recommended to do the other way around). The only requirement is to not spend money that is not in the envelopes.

Step 4. Bonus Savings

We already put away a small amount to our savings account at the beginning of the month so now we can go crazy and spend everything we have in the envelopes, right? Not necessarily! I encourage you to still strive to not spend more than necessary. If you have money left in your envelopes by the end of the month you have bonus savings! (For a person who loves to save money, me, this is a whole new level of excitement, savings on top of savings!) You already have the money in cash so now it’s time to bring out that old piggy bank. If you don’t have a piggy bank it is equally fine to use a jar or anything where you can safely keep your money.

I call this money bonus money because you have taken them outside of your budget. This means that when you spend this money it has zero influence on your monthly budget. It’s like enjoying the spending without getting the consequences of spending. I encourage you to save this money for a time when you want to treat yourself with something.

Let’s get started!