Prefund is built around the idea of the Envelope Budgeting method, which is a very conscious and iterative way of managing your expenses.
The idea of Envelope Budgeting is to estimate your expenses proactively, to get an overview about your upcoming expenses in advance. In other words: to create a Prefund.
When you plan your budget ahead you will be able see all your expenses even before they happen. This leads to fewer impulse purchases and saves a lot of money on the long run.
Let’s see how you can use this method in Prefund. The three main building blocks of Prefund are:
These 3 building blocks will help you to keep your finances organized in a simple way. Here’s how.
Budgets are estimated plans for future expenses. What should you create a Budget for? Well, it’s really up to you, but here are some ideas:
- 2022 December salary
- Trip to Bali
- House renovation
- My awesome start-up project
- Cafeteria Card expenses
You can create as many Budgets as you like, and you can maintain multiple Budgets at the same time as well.
Once you are done with your Budget, you can easily duplicate your Budget to start a new one with the exact same Envelopes.
Envelopes represent your expense categories within your Budget.
Just like with Budgets, it’s also up to you what you create Envelopes for. Try to think ahead and figure out, what you will spend money on in this Budget. Here are some ideas:
- Eating out
- Gifts and treats
- Streaming subscriptions
- Sweets and snacks
Breaking down your expenses into these Envelopes will force you to estimate your spendings proactively, and help you to see where your money actually goes.
Each Envelope will have an Initial Amount. That’s the amount you are planning to spend on this category. Don’t worry if the estimation is not 100% correct; you can fix it later as well.
Envelopes are also color coded: each Expense will be colored with the corresponding Envelope’s color for clarity.
Expenses represent your… well, expenses.
Create a new Expense in the corresponding Envelope whenever you spend money. This will give you an accurate and revealing picture about your spending habits.
You can also add attachments to your Expenses: photos, PDFs or other files. This way you can store your bills, recepits and invoices right next to your expenses.
If you wish to learn more about how to budget efficiently, check out these Prefund Docs as well: