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Monday, April 6, 2009

Making the Envelope System work for you

So, those of you who read my article on Money Saving Mom know that my husband and I have been doing Dave Ramsey's Financial Peace since about October.  We have cut our debt significantly, but more importantly, we now live by the principal that "every dollar has a name".  Basically, we agree that all our money coming in has a place on where it needs to be.  It isn't suddenly appearing for us to buy things.  

I teach swimming 3 afternoons a week currently.  There is a lot of cash that comes in from that and it would be very easy for me to just put it in my wallet and spend it the next time I wanted to go to McDonald's with the boys or found something cute at a store.  Instead, when I walk in the house I pull out our Envelopes provided to us when we signed up for Financial Peace University, and I start filling them.

Currently we are using our envelopes for the following categories:

Food
Clothing
Gifts
Entertainment
Prescriptions
Blow Money (Individual Spending Money)
***Household this envelope was just added today.  Our boys cold mist humidifier broke last night (it was my brother's who will turn 30 soon) We need a new one.   We have money for it, but I realized today that it would be easier to have a "fund" set aside for things like this.

We do not use an envelope for gas money, although we do pay debit NOT credit for gas.  We do this for a few reasons.  1) We have 2 little kids and don't want to leave them in the car all the time to pay for gas.  2) We have some pumps that are pay at the pump or pre-pay and we don't want to deal with that.  3) We don't want to be tempted to buy something more. :)

We have a prescriptions envelope because the way our insurance works we pay upfront for medicine and are reimbursed.  I just cash the checks and put them back in the envelope for next month.

Envelopes like clothing and gifts are not used all the time.  The goal is to not use cash from those envelopes unless it is for designated items.  That way, when we hit wedding season (like now) or Christmas there should be a nice amount of cash available for purchases.  Of course, there is always the on-line issue.  Paying cash isn't always the cheapest way to go.  But, this has a simple solution.  Simple deposit the purchase amount into the bank, and you can purchase with a Visa debit card and have the same protection as if it was a credit card.

Do you use the envelope system?  What other categories do you use?

1 comment:

  1. We just started using this cash envelope system in March. It is going so well and I am so much more aware of what we are spending our money on versus when we were using debit cards.
    On example was on Saturday morning I had to run an errand and thought hey I will go through Burger King and get breakfast, so I was in their parking lot and then told myself no way, I am not spending 12.00 of my cash on this, we have food at home! I would of never thought this if I wasn’t using the cash envelope system. We are also doing the zero dollar budget where every dollar goes somewhere, with the exception of 50.00 that is left in the checking account as a cushion.
    I write about my experience with the cash system on my blog under several posts!

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