Envelope system - Does it work?
  • SaraSara
    Posts: 1,064Member

    Does anyone use this? If so, does it work well? IT is called the Dave Ramsey Envelope System

    On a budget? Still over-spending? Trying to figure out the best way to organize your finances and spend wisely?

    Get on a Simple System

    I found out that Grandma's way to handle money still works. People used to always use cash envelopes to control their monthly spending, but very few do in today's card swiping culture. The envelope system is a key component of the Total Money Makeover plan because it works. Here are a few simple basics for starting a cash envelope system:

    1. Budget each paycheck. Budget is a dirty word to most people, but you must budget down to the last dime if you're going to successfully implement the envelope system.
    2. Divide and conquer. Of course, there will be budget items that you cannot include in your envelope system, like bills paid by check or automatic withdraw. However, you can create categories like food, gas, clothing and entertainment.
    3. Fill 'er Up. After you've categorized your cash expenses, fill each envelope with the money allotted for it in your budget. For example, if you allow $100 for clothing, put $100 in cash in your clothing envelope for the month.
    4. When it's gone, it's gone. Once you've spent all the money in a given envelope, you're done spending for that category. If you go on a shopping spree and spend the $100 in your clothing envelope, you can't spend any more on clothes until you budget for that category again. That means no visits to the ATM to withdraw more money!
    5. Don't be tempted. While debit cards can't get you directly into debt, if used carelessly, they can cause you to over-spend. There's something psychological about spending cash that hurts more than swiping a piece of plastic. If spending cash whenever possible can become a habit, you'll be less likely to over-spend or buy on impulse.
    6. Give it time. It will take a few months to perfect your envelope system. Don't give up after a month or two if it's not clicking. You'll get the hang of it and see how beneficial the envelope system is as you dump debt, build wealth, and achieve financial peace! See ... simple!

    Certainly, some bills may come in at different times of the month, so you'll need to adjust your written game plan to take it one step further. You need to plan the budget based upon your pay periods.

    Say that you get paid twice a month. If you can write down which bills you plan on paying from each paycheck, you will not be left with a surprise bill. Spend each month's income and each individual paycheck on paper before it comes in.

    Think of your problems as challenges to overcome not obstacles to be avoided.
  • sanityseekersanityseeker
    Posts: 3,404Member
    Ive never tried the envelope system, although I want to! but here are my two cents. 
    We get paid every other week, so we always had the entire rent coming from one check. I called the owner and they were willing to take 1/2 the rent twice a month. Which means if we are still here at the end of this year we will be a month ahead on rent and wont owe for december! Since then I have found two other bills that are fixed amounts who are willing to take half every other week. It makes each check a little more realistic for us and gives them quicker payment in the long run, even if it doesn't seem that way to you! It never hurts to ask, all they can do is say no and you keep paying what you already pay. 

    "If the pizza man truly loves this babysitter, why does he keep slapping her rear?" -Castiel
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  • NinLee
    Posts: 729Member
    We tried the envelope system at one stage, but we didn't work for us. What we have done is set up automatic payments for our regular bills. DH gets paid weekly, so we pay x amount into each bill each week. We have also set up a separate account for things that get paid once a year / car registrations / school things etc - it's a good interest account, and we can only make one withdrawal/transfer from it per month (we declined the card for that account). Calculated the amount and divided into a weekly amount, and have set an automatic payment into that account as well. It's working out pretty well. Our rent is always paid, and we have actually landed up in credit balances on our power, gas and water bills, and aren't caught short when it comes to big amounts like car registration etc :)
  • AnonUser28
    Posts: 2,043Guest
    We do the envelope system, and it works for us, but our budget is very basic. We have no car, we don't own a house, etc... so it is not very often we need a big amount for something unexpected. We get money once a month, so the first thing that happens is we pay off the bills. Once that is done, what is left gets divided into piles for groceries, busfare, etc. Then I go even further by dividing it into daily amounts for the groceries, so I know that if I go shopping with $60 I need to get enough food for three days. We get a family allowance check every three months that is pretty larege since DH is on disability and I am a student, so that goes to pay of any larger expenses, like new clothes or school books, and occasionally a luxury.
  • We set up each bill to pay out of each check in advance. And when anything comes in the mail it's set to a check. Paycheck in, bills out. Same day.
  • BeerWenchBeerWench
    Posts: 2,819Member
    Yes, it works. We've paid thousands of dollars off with it. You can find great stuff online (free) from Dave Ramsey. Good stuff and sound advice. Let me know if you have more questions, we've been doing it for several years now.
    :¦:-•:*'""*:•.-:¦:-•** She who leaves a trail of glitter is never forgotten**•-:¦:-•:*'""*:• -:¦:-
  • AKimiBAKimiB
    Posts: 1,809Member
    Yes! It's the only way I was able to effectively pay off debts (before I was married, xf racked em' up on me along with a foreclosure. :( )
    I wrote the amounts needed (I rounded to next ten dollars to give way for interest, and once it was filled, money-ordered and sent in. Paid off roughly $15,000 worth that way! I didnt really think of it as an actual system at the time though... More of a way to list/see my different debts, and slowly see them being paid off.
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  • GritsGrits
    Posts: 4,370Member
    We found that it works pretty well. The only exception for us was the whole concept of "pay yourself first". Our budget and our income leave us very little for savings, if any at the end of the month. So we usually leave that part out. But we have found that it definitely helps us keep from overspending and also helps us make sure that we have the money to pay the bills on time instead of coasting by the seat of our pants.
    "I believe in being strong when everything seems to be going wrong. I believe that happy girls are the prettiest girls. I believe that tomorrow is another day, and I believe in miracles." ~Audrey Hepburn
  • momofeveryonemomofeveryone
    Posts: 1,917Member
    i tried and failed spectaculerly. i dont know how to explain our system but it works.
    i want a nap. and some chocolate. who's with me?!
  • GingersnapGingersnap
    Posts: 9,696Member
    We use an envelope system, but not exactly the one outlined above. We do use a credit card, but we pay it off every month. We pay $19 a year for the service, and no interest fees. We do not use automatic bill pay, because we want to be able to dispute an erroneous charge before they get our money (though I do hear automatic payments work great for some people). We pay into envelopes for large upcoming expenses. We add and subtract envelopes as we go. Our system isn't as exacting as the above system, but we pay all of our bills on time and manage to save up for projects. 
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  • crazymama2twocrazymama2two
    Posts: 841Member
    io used to do that when i was married to my exhusband but i can't do that now cause i work at home and get paid ONLY once a month...by the time i get it, deposit it, its GONE!! :(  but it totally worked!!
  • SaraSara
    Posts: 1,064Member
    I am going to give it shot. I tend to be an impluse shopper so that is where the most changes have to be made.
    Think of your problems as challenges to overcome not obstacles to be avoided.