Taking Control of Your Budget with Envelopes
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Taking Control of Your Budget with Envelopes

Posted on Monday, January 6th, 2014 at 8:00 am
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In this post we're going to cover a popular method, the envelope system, created by finance coach Dave Ramsey that seems to have worked for many.Taking control of your personal finances and household budget can seem like a daunting task. More often than not we have no idea where to begin! In this post we’re going to cover a method, the envelope system, popularized by personal finance coach Dave Ramsey that seems to have worked for many. The basic gist of this method is that much of our overspending comes from how easy it is to use our credit and debit cards. The envelope system removes cards from the equation entirely by carrying envelopes of cash. Here are some easy steps you and your family can take to perfect to adapt this strategy:

How to Use the Cash Envelope System

Create a Strict Budget and Distribute Your Funds

The first step in this system is to create a strict budget accounting for all your available money. Your family will need to budget every penny and account for each category of spending (even for your savings!). Once you’ve accounted for each category you’ll want to designate an envelope for each one and fill them with the money you’ve allotted. At the end of each month you’ll refill your envelopes, but if you do run out of cash during your month of  you aren’t allowed to refill it! Because you aren’t allowed to make any last-minute ATM runs you need to be extra careful when creating your household budget.

Include a Fun Category

Just because you’re on a strict budget doesn’t mean you can’t have some fun. What really matters when using the envelope system is that you account for your fun spending in your budget. Unexpected and unplanned spending is what you’re trying to avoid, so don’t be afraid to include an “Entertainment” envelope if you’d like.

Get Creative with Envelopes

This tip is definitely for those that are creative at heart. Since you’ll be using your envelopes quite a bit it doesn’t hurt to invest in sturdy reusable ones, or create your own out of artsy colorful paper. Putting your own touch on cash envelopes can make your budgeting more fun for the entire family. For templates, inspiration, and tutorials check out Kelleigh Ratzlaff Design’s post here.

Be Patient!

It’s true, practice makes perfect. The first time you try the envelope system will be a challenge. You may fall short in some areas and overestimate your spending in others. The good news is that you get to try again in a month! Evaluate your spending habits at the end of each budgeting period to see which categories need less or more money, and then try again.

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Good Tip: Saving money is important – especially if you have a lot of expenses like bills to pay, loans to pay off, and all the other things that drain your bank account. Figuring out a way to save money can feel tedious to some, and like a punishment to others. U.S. News suggests that you try one of these money saving challenges. The “No Eating Out for a Month” Challenge This one is self-explanatory. The goal is to avoid eating out for an entire month. This might be super easy for people who enjoy making meals at home. People who really enjoy dining out, or ordering food to be sent to their home, may struggle with this one. It’s worth a try because spending money on take-out is more expensive than buying groceries. The Pantry Challenge This one is a variation of the “No Eating Out for a Month” challenge. The goal is to use up all of your groceries before you buy more. It forces you to try and remember why you bought a food or beverage that you don’t know what to do with, and gives you the opportunity to find a way to use it. The one exemption to this challenge is the foods that have expired. Don’t eat them! Throw them in the trash. The “No Spend” Challenge Make a goal to avoid spending money during an entire weekend. The only exemption in this challenge is that you are allowed to pay bills. This challenge is interesting because it requires creativity. You must be creative and find workarounds for problems that you would typically solve by spending money. You may have a different outlook on spending after finishing this challenge.