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How to: My Envelope System

My system is one I’ve adapted and tweaked from Dave Ramsey. I don’t have one of those handy-dandy
 little envelope binder systems (that he totes on his website- they are cutesy but I can’t justify the expense)
— I use plain-jane regular sized envelopes.
The gist of the system is this: you stay within your budget better when you spend cash only. Try it for one 
week. I’m not kidding. I found that even with using my debit card I was spending more than I should have. 
The envelope system assures that I won’t spend more than I have- period.
First you must have a budget- you need to know the amount you are going to put into each envelope! 
So go make your budget [check the category Financial Bliss in my sidebar for more information on setting
 up a balanced budget.] 
Got your budget done? Good. Next, I designated an envelope for our spending and savings categories. 
I do not have envelopes for those categories that I write checks for (such as our mortgage) or for those 
that are automatically deducted from our checking account.
The only envelopes I carry with me in my purse on a regular basis are the gas and grocery envelopes. 
When needed I carry money from the birthday/Christmas envelopes. The other envelopes are kept in a 
locked box in a secret location (shhhh!).
Perhaps it is just me but I find I do better and stick to my budget system better with the envelopes than 
with trying to keep it all in one checking or savings account (not to mention that after being garnished I’m 
pretty reluctant to put any money in the bank). Probably because I am a visual person and need to see 
the money all separated in its “right places” all neat and nifty like.
What do I do if there is money still in the envelope at the end of the week?
That’s easy- I praise God, of course! And I keep it there. If there is money left over in the grocery envelope,
 it may just help me to make a special purchase the next week or so- like when chicken breasts are 
BOGO or the price of a good steak dips way down or those mammoth packages of toilet paper go on 
sale.
What happens if there isn’t enough money in the envelope?
Well, plain and simple- you don’t spend what you don’t have. Say your at the check-out counter at the 
grocery store and the total is more than you have in your envelope—you don’t want to embarrass yourself 
and admit that you don’t have enough money . . . . BUCK UP! Don’t fall in this trap and whip out your debit 
card (or heaven forbid your credit card- you are suppose to be getting rid of that!). Embarrassing yourself 
might do you a bit of good. Look the cashier right in the eye and say, “I’m sorry but it seems I’ve gone a 
bit over budget. I’ll need you to take a couple of these items back.” It is simple and you will find most of 
the time that not only are they happy to oblige but they’ll chat with you about being budget conscious and 
maybe, even, encourage you to keep it up!
Of course, you can keep that from happening by carefully calculating what you are putting into your cart- 
I either use a calculator or mentally round the items up to the nearest dollar and keep tally. So what if the 
empty envelope is your gas envelope and you’re sitting on “E” and need to get to work or some other such
place and staying home and staying put is not an option? Do not put this on your debit or credit card and 
do not touch your emergency fund for this. You will obviously need to “borrow” from another envelope to 
cover it- borrow from an envelope that you don’t use all the time- such as clothing or entertainment or your
 “blow” money. 
Really, when you think of it- should you be going to the video store to rent a couple of DVDs for $8 bucks 
or should you use that to put a couple of gallons of gas in your car- what is more important???
Remember what I said about being realistic.
One more thing:
With the envelope system, I include a slip of colored paper in the envelopes where I jot down the date, 
place and what I spent. For example, the pink slip of paper in my grocery envelope shows this from 
yesterday, “1.30.08 Aldi’s $57.50”. I also slip the receipt into the envelope until I can sort it and place it in 
my monthly receipt envelopes at home. I never EVER have them put my receipt in a bag. Nope!
An Important Side Note: Using the envelope system does mean that you will, at times, be carrying a 
sizable amount of cash in your purse. Keep your purse with you at all times. Do not put it in the cart or set 
it down to look at something! If you are concerned about carrying all the cash- you could put the gas 
envelope in your car’s glove compartment or center console. You need to remember to be aware!

Envelopes...

8:05 PM, 2008-Feb-7 .. Posted by mominpa

Yep that is when our budget works best... it is painful...it is a discipline...but it DEFINITLY WORKS!

Instead of a ton of envelopes, you know what I use? A Coupon organizer...and then I just change the labels on top and put the cash in there. It works WONDERFULLY!!

We divide up the $ on Thrusday and try to have gas and groceries done by Friday so I'm not carring around $$!!