I’ve read about the envelope system in several books and websites but was always skeptical of doing it.
I came up with a dozen different reasons why it wouldn’t work.
- I didn’t particularly enjoy having that much cash on me.
- I didn’t know how to get the money into the envelopes for a whole month at a time.
- I figured I would end up borrowing from one envelope to use in another.
- And my favorite excuse: I’m not organized enough to use this system.
I’ve been using the envelope system for three weeks now, and I have found it the exact opposite of my previous opinions.
I have found it very easy to follow once I fully understood it.
It has been easy to put the money into the envelopes each “payday,” It has been super simple to keep track of where my money is going.
Dave Ramsey describes the Envelope System as the best way to organize your finances and spend wisely.
The steps involved in it are straightforward to do. In my opinion, the hardest one is the first step.
1. Make a balanced budget
It would be best if you allocated where every single penny that you earn is going to go. If you have a partner, make sure you do this together, and everyone agrees.
2. Have different envelopes for different spending
Assign envelopes for your variable spending: items that change from month to month, like gas or groceries. Everything else that is fixed should be set up to automatically come out of your account each month, so you never forget to make a payment.
I have envelopes for Gas/Transportation, Groceries & Personal Products, Allowances, Clothing, and Misc. Your budget should tell you how much need to go into each envelope for a month.
3. Place the money into envelope
Divide these amounts by the number of times you get paid each month. On payday, place that amount of money in cash into the envelope.
For example, I receive money twice a month at the moment. I divided the amount I’m currently budgeting for gas into two, and I put that amount into my envelope when I get my money.
4. Only take money from the designated envelope
When you spend money, you only take it from the designated envelope and replace it with a receipt. When the money is all gone, there’s no more shopping until the next time you have cash in the envelope. Any left-over money can be saved for later dates; it doesn’t have to be spent each month.
5. Be accountable to yourself
Do not take from the grocery budget when you want to have a latte. It only hurts you, your family, and your financial status in the long run.
Because I have such a small income, my envelopes are fewer and containerless money than they would otherwise. Once I’m working, I’ll have to increase the clothing budget and the gas, but for now, it is working for me. I now know when I can treat the kids to ice cream or make a movie by myself.
Those of you looking to tighten your belt a bit, financially speaking, might want to give this a shot. Let me know how it goes for you.