Saturday, January 9, 2010

The Envelope System


google images


The envelope system is a great budgeting tool! I used to use it just for groceries and then slacked off but my grocery spending got out of hand. I was using my debit card but it's just not the same as using the envelope system (at least for me). I would always know subconsciously that I really had more to spend than my allotted amount if I found a "deal".   I found "deals" every time I went grocery shopping LOL! Now we're using it for a few more categories besides groceries.


Basically, what you do is create a spending envelope of cash for your budgeted categories. For example, if you are budgeting  $100 a week for groceries. You would put $100 in cash into your grocery envelope and when that's gone - it's gone. That's all you can spend because that's all the cash you have. Also, if you only spend $60 then that leftover $40 could go into next week's grocery envelope or you could use it for something totally different.  Like a new china cabinet ~ smile!

Only you can decide what categories to use envelopes for. Some people like to have a gas envelope. Some people don't want the hassle of going in to pay for fuel, they want to pay at the pump. Someone might spend a lot on cosmetics and want to control their spending in that area. An envelope with a budgeted amount for that category would be a good idea. Me - I hardly wear makeup so I spend close to nothing on it. That's not a category I need to control.

My snazzy Red envelope system from Dave Ramsey


On the other hand, I have added Books to my envelope system because I could go crazy (and often have) in a bookstore.  Even though we utilize our library AND we buy books at the thriftstore, we still spend waaaay too much money on books.

I've also given myself a Thrifting budget. Because honestly, I have a very nice Goodwill  about 10 minutes from my house and I could buy something there every time I go! Whether I really need it or not! Little dribs and drabs of money, here and there, they all add up in the end. So I've given myself a small budget to buy totally useless but pretty things. This does not include some major pieces of furniture I'm looking for which is in another budget category and might or might not be purchased at a thriftstore.

I've also added Dining Out.We try not to eat out alot, but we were getting into the habit of having lunch out every Saturday along with breakfast out during the week and an occasionally dinner out also. That's just too much money going out of our budget for that in light of the fact that we have a daughter starting college this year plus we just had to have a new furnace/ac unit installed PLUS all the other things we want to do - on one income.


I'm using my Dave Ramsey envelopes right now. But you can certainly use plain old envelopes as well. Cyndi (Cyndi's Re-Creations  ) sent me a link to a tutorial Free Envelope Template & Tutorial  that Kelleigh did on her blog  Kelleigh Ratzlaff Designs .




How cute are these envelopes! I'm definitely doing her tutorial  and making my own once the ones I have wear out.



Or how about these cute fabric envelopes made by Heather  Are You Using the Envelope System.


Give it a try. Start with one category and see how it goes. It may take a few months to tweak your budget and get the right amount for each category. So don't become discouraged if it doesn't work for you right away.

I think using the envelope system lets you really comprehend how much money you really really have versus some abstract or general idea of how much you have to spend. I'm hoping it'll keep our spending in line. I'll let you know in a few months how it's working for us!


Here are some links to checkout if you'd like more info:
Dave Ramsey Envelope System
Simple Mom - Envelope System - great post about how she manages it
Mvelopes - an electronic version of the envelope system for those that don't want to carry cash. I've never used but have heard alot of good things about it.

46 comments:

Melissa Miller said...

Manuela what a simple yet very effective sounding idea! Love it!

I need to pick up his book now that you recommend it so highly. We have some shopping to do on Amazon and I'll tell my hubby about it. He loves books about this.

Stay Warm & Happy Sunday! ~Melissa :)

The American Homemaker said...

I used to do the envelope system. It worked well when I was a new wife still trying to figure everything out :)

Sara said...

I love this system. Although I don't always do it, there are always times during life where the belt really needs to be tightened...and the envolope system is the only thing that worked. It helped us keep track and be more accountable for our money. And when you have it right there in front of you....when you know that a trip to the mall may make you eat PB&J for a week.....You re-think things.
We've used this system for big things...Debt repayment, saving for a move, Saving for a big home repair or purchase, a vacation....etc.

Thanks for posting this though....it helps remind me why I love using cash when possible....accountability!

Southern Belle said...

What a great post! I thought of beginning this plan awhile ago, but at the time it wasn't possible... Hopefully once we are settled in our new home I can start...the pretty envelopes sure help me want to begin soon! BTW, I love your new blog design and button. I added it to my blog. Hope your weekend is going well.

~Christine

Mimi Sue said...

I used the envelope system years ago when my children were young. It really works well because I could see what I had left and planned accordingly. We also put $10.00 a week in a Christmas envelope. With 4 kids that really helped defray the cost of the holidays. Mimi

Sheryl said...

We haven't used the envelope system yet, but I think it's a great idea! We only use cash so it would be perfect. Thank you!

Julie Harward said...

MAYBE I NEED TO DO THIS FOR GRAND CHILDRENS BIRTHDAY GIFTS...IT'S GETTING EXPENSIVE, ESPECIALLY TO MAIL IT TOO! COME SAY HI :D

Adrienne said...

We've used the envelope system more than once and always found it very effective. We've gotten a bit 'lazy' lately and wandered back to the debit card. Your post today goes along with some of the changes we're making this year to have better control of our finances. Thank you for the wonderful envelope ideas. I found answers to some of my complaints about our own former system. Love the creative ideas of using something besides plain, old envelopes! ~Adrienne~

Ally's Corner said...

Thanks for the link to Kelleigh’s blog. I'm trying to read only blogs about organizing and saving money. Decorating blogs I love but they make me want to spend money and that is not where I want my life to go right now.

Vee said...

My mother-in-law used this system all her married life. I thought it was crazy, but I may have to rethink that.

Mrs. CLB said...

My parents told me that when they were first married they used this system and it worked very well. As a newlywed, I really can't wait to start using this! Winning your giveaway will help!

Tant Berg said...

Thank you for your inspiration! It sounds very smart to do so, but I don't like to have too much money in the house, I think they are saver at the bank :(

Melanie said...

I have to say that this is a good system but I wouldn't keep to it. I guess because we don't have to budget that much and we don't have an endless supply of money but we don't spend a lot on extra stuff. Just regular bills. My most expensive thing monthly is our grocery bill. (other than our house payment) I could use an envelope for that:)

I will say that anyone trying to get out of debt, this would be a great way to do it. I love the evelopes. That would make it much easier if you were pulling out pretty envelopes instead of white ones:)

Amanda said...

Wow what an easy and simple idea! I am the kind of grocery shopper that goes every 1-2 days. I grew up in Europe where you go to town everyday to get what you need for dinner! But I find it all adds up at the end of the week. This sure would help me keep control of the $! Thanks:)

The Working Home Keeper said...

I just posted about going back to the envelope system for our grocery spending on my blog yesterday. We had cash leftover at the end! That never happened when I used my debit card. Cash is king!

Alberta said...

Thanks Manuela for reminding me that a simple system such as this is often all we need to get back on track...no need for fancy software to track your money...just envelopes and pen & paper!

Marla at Always Nesting said...

My daughter and her husband use this system. It works for their family budget and spending habits.

I'm soooo good in every spending place in my life except TJ Maxx. That's my weakness. I should do the envelope for a TJ Maxx budget. I confess I stop by at least twice a week. But, only because it's across the street from Trader Joes and a family needs milk, right?

Laurie Anne said...

Manuela the jar system is great! Good to hear people are keeping track of their finances and not getting in over their heads. We use jars at our house. Small jam jars and I have a notebook which we jot down and hold receipts for all our purchases. Leftover money either gets carried over to the next month or we buy ourselves a treat.
Great post!
Have a great day!xx

DarcyLee said...

My husband and I got away from our envelope system over the holidays but we are back at it this month. We usually have envelopes for our groceries and gas but I'm thinking we should do it for entertainment and for my thrift store and fabric store, too. Great post.

Jill said...

You have the best ideas, Manuela! I've had the Dave Ramsey book for a few months and haven't taken the time to read it. This has really prompted me to read it and start the enveloope system. We have friends who have followed his system for at least a year now and have paid off a SIGNIFICANT amount of debt. It definitely works! Thanks for sharing. Hopefully, we'll have safe roads around ATL tomorrow:)

Sharlotte said...

Hi Manuela,
My family is also an avid Dave Ramesy fan! He has been a saving factor in our lives on many levels. The envelopes I use are just plain and get yucky after a couple of months...I definitely want to try to embellish them! Thanks so much for sharing!!!

Norma Lee @ Norma Lee Good said...

They say that people that don't change bad habits are afraid because it is "uncomfortable" to change. This would be uncomfortable for me. We don't get ourselves in debt but we use credit card for everything to equal points. I have often said that if we used cash only and actually "felt" like we were spending money we would shock ourselves. This is a great idea and I would love to try this. You are inspiring.

Lisa said...

Have you heard of https://www.youneedabudget.com ? This is the ULTIMATE envelope budgeting system! I've been using it for almost 2 yrs and love it. It's an actual budgeting program that you load and it replaces Quicken or your other software. What you do is set up categories (envelopes) and budget into them based on what you have available. So you're budgeting *in advance* just like using envelopes but yet you can use your debit card, cash, checks, etc and don't have to carry cash around if you don't want to.

supplies overflowing! said...

Like others here, my husband and I used this system as newlyweds- when we were both working. It was a wonderful way to get a handle on where we were spending, and how we were saving. After a while we didn't "need" it anymore.
If you havent' given this a try, it is worth it.
j.

Linda (Nina's Nest) said...

Manuela, we did the envelope system with our kids (now grown)becinnning in 7th and 10th grades. We gave them envelopes for clothes, school supplies, church tithe, food, etc. and said, "This is it. Don't ask for more. You'll get more at the beginning of the next month." It worked wonders! Our daughter started shopping frugally instead of and all of THE cool stores! Larry Burkett had actually written a book with this system and we employed it. I think I'll go back to that for the grocery store - you are right about being careless with the debit card! Thanks for the reminder. Linda

Gloria said...

I think the envelope system has been and is a good system for keeping control of one's budget. Thanks for sharing. have a great week.

Sandra said...

Great thrifty budget idea!

Kathleen Grace said...

This really is a great system, and a pretty envelope makes it more bearable to budget, don't you think?:>)

Brenda @Cozy Little House said...

I hardly ever wear or buy makeup either. Seems so silly when I'm just going out in the garden more often than not. I don't go out but once or twice per week, so that helps. Of course there's those Etsy purchases. One thing to look forward to, Manuela. When we were forced to get a new heating system two years ago, sure helped our heating bills. Concerning the quilt you asked about. It probably took me a month or so to make it. And back then (in the nineties) I didn't have a sewing machine. I hand pieced and hand quilted. Neither my hands or eyes could do that now! I just loved it though! I cherish my quilts.
Brenda

Storybook Woods said...

I do chash but never done envelopes but I am intrested xoxox Clarice

Donna said...

This a great idea! I don't wear much makeup ... sometimes go for days without any! I don't go much, although I do need to have an envelope with me when I go to the quilt shop or Hobby Lobby. Fortunately my hubby takes care of the finances...thank goodness!
Thanks for sharing this. I may order his book off Amazon..like the free shipping if it's over $25!
Blessings,
Donna

Tanya said...

Manuela, I just told my husband that we're getting back on the envelope system! My grocery budget has also gone out of whack. This last year medical expenses have been a killer, so we've got to get back on track.

Heather said...

I use the envelope system when we go on vacation. I figure out the amount of money I want to spend each day and divide it up before we even leave the house. I also include a little extra on day one and the last day to include airport expenses, etc. I LOVE the envelope system! I don't use it on a regular basis because we never carry cash unless we're on vacation.

Kami Gimenez said...

We love the envelope system and have used it for a couple of years now. We have many categories. It's so helpful when holidays and birthdays come to have a Holiday/Gifts envelope. Clothing envelope is really good, too. This system really makes us look at our purchases and make better decisions. Now, to start making prettier envelopes! :o)
Thanks for the post!
Kami
adayinthelifeofamissionarywife.blogspot.com

matty said...

We went to our first Financial Peace University class tonight. What an inspiration!

Thanks,

Matty

sweetjeanette said...

The envelope system is a great tool! Thanks for reminding me. I had stopped (can't remember why) but as part of my new 2010, frugal is definitely a "return to" item for us!

sweetjeanette.blogspot.com

Jenni @ nest to keep said...

Hi Manuela~
I love this idea! I was not born a frugal person, although I married one! My tastes are simple, but when it comes to my home, I can get SO carried away with projects that it's hard to keep it on budget! :) "Home Improvement" would be a very good envelope to use for us! I like the idea also of using envelopes for other categories like groceries, and saving what you don't spend towards something else! (Motivation to be keep spending down!)

I love the envelopes you used, too! I never would have thought to do that! Oh, and those fabric envelopes are lovely! :)

I hope you had a wonderful weekend!

BLESSINGS,
Jenni

Crystal said...

Hi Manuela,
This is so funny, my husband and I were just talking about showing our teenagers the real value of money. We use this envelope system to help us budget, especially after the babies came along. But through the last few years, we have just got in the mode of shopping for best price. My teenagers need to re-learn the fact that when the pocket is empty, it is empty. And that doesn't necessary equate to being "poor", which they have no idea about. It just means your are being a responsible consumer.
Have a great day!

Tracey McBride ~ Frugal Luxuries™ said...

Love, love, love the Envelope System!!
Mike and I used this system for years and years with fantastic success. I also adapted the concept to save for the holidays!! This is a great inspiring post Manuela (as always).
Thank you so much for sharing all your good thoughts and ideas.
Love,
Tracey
x0x

Sandy said...

I have heard Dave talk about the envelope system many times. I have never tried it, although I do try to follow allot of his recommendations, This is one I really need for the grocery store and the thrift store. I'm not really that bad with any other shopping. Thanks for sharing, this was very informative, and good to hear from someone who has actually used the system.
Sandy

Cheryl said...

I'm actually in LOVE with Dave Ramsey!!! He has completely changed my life and I go through withdrawl if I don't get to listen to him every day on the radio. = )

Great post! Thank you!

Rachel@ Life in #3 said...

We used to use the envelope system, but got out of the habit of doing it a few months ago. I really need to break them out again next month though, because we are overspending many categories.

Puan Isah said...

Hi there Manuela,
What a marvellous, great post! Just to let you know I am trying this 'envelope system' after reading your post here but by using some free 'Angpows Envelopes' that I have kept somewhere :)

Thank you again!

Dawn said...

I use the exact same system on vacations - each day when we wake up, we each get a new envelope with the days spending money. If you had some left from yesterday, GRAVY! And once its gone for the day, you are done! (Works ESPECIALLY well in Vegas, LOL)

Suzanne said...

This is a great post! Our church did the Dave Ramsey seminar, but it was held on an evening we couldn't attend.
I'll check out the link!

Wendy said...

I just started using the envelope system at the beginning of this month. It's such a simple yet very effective way to keep spending under control. So glad to see that it's working for so many others as well.