Using My “Envelope System” to Budget Money

Posted by Mrs Money on July 16th, 2008

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envelope.jpgI know there are a lot of people that use Dave Ramsey’s Envelope Budgeting system. While I think it is an amazing budgeting system that works for so many people, I just can’t do it myself. I decided I was going to put my own spin on the envelope budgeting system to make it work for myself. I’m happy to say it’s been working out quite well!

Here’s how Dave Ramsey’s envelope budgeting system works: You have a bunch of envelopes for each category you spend money on each month, such as food, clothing, eating out, entertainment, fun money, gas, etc. When you get paid, you fill up each envelope and throughout the month you subtract your cash from the appropriate envelope as you need. When the money is gone, it’s gone, and you can visually track how much money you have to spend. My problem is that it’s such a hassle to have so many separate envelopes to track and make sure you don’t lose money! I am just worried that when we go out to eat, I’d forget to take the envelope, or I’d lose the money or something. I’d hate to have to carry around all those envelopes with me, so I devised my own envelope system.

How my envelope system works is like this: in addition to our normal budget, when Mr. Money gets paid (every two weeks), I take out $120. I know this doesn’t sound like a lot of money, but trust me, it works! I don’t pay for groceries out of this money. Grocery money is used with my debit card. I pay for gas with my gas rewards credit card and when I buy gas, I make a transfer over to the credit card from our checking account. The $120 cash is used for extra trips to the grocery stores to pick up small items I forgot (helps me limit these!), clothing, haircuts, eating out, and whatever else I want.  I know the $120 is going to have to last me two weeks, so I am very careful about how much I spend, and it gives myself and Mr. Money a visual on how much we have left to eat out on.  If we don’t have the money, we don’t go out to eat!

This system has been working very well for us. We don’t have to worry about keeping the separate envelopes in the house and carrying them with us.  I would highly recommend you give it a try.  I find that I spend less and am more careful when I’ve got the cash there in front of me.  When I have my debit card and I make the frequent trips to the store, I end up getting a bunch of stuff that I wasn’t intending on getting.

How do you budget- do you do the envelope system, or are you a debit card user? Do you do something else?

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9 Responses to “Using My “Envelope System” to Budget Money”


  1. bkcwilliams says:

    We use the same system, but we take $100 out per week. In theory, the envelope system works, but in reality it could turn out to be a nightmare.

    A big problem that we have is using the debit card. Now, even fast food places take it, so it makes it so easy. You really need to have the willpower not to use it.

    Goes back to to old rule: do you NEED it, or do you WANT it.

    [Reply]

  2. Mrs Money says:

    bkcwilliams- I think it works well for me. Of course, I do need to get better about spending because I have cash, but at least I am not using my debit card as crazily as I used to! :) It all takes time. I think it’s great that we use the same system!

    [Reply]

  3. Verona says:

    I have learned how to use Quicken for budgeting I generally use a debit card and it is easy to record debits with Quicken at the time of the transactions. I use my cell phone and an interent connection to keep track of what is available until payday. This program keeps me reminded of bills that are coming up too,and many other useful features. I find this works for me.

    [Reply]

  4. Mrs Money says:

    Verona- Thanks for the tip! I’ll have to give Quicken a shot!

    [Reply]

  5. Kelli Garner says:

    Thats very good to know… thanks

    [Reply]

  6. Jodi says:

    Firstly thanks for having a budget blog! This year we have Jada financial over haul refinancing out of a fixed loan which gave us 100 a week back, paying off the credit card and cuttin it up! And fine tooth combing our bills and really understanding how much we spend per week.

    1) we added up all the bills for the year and made them into a weekl amount we needed to cover The house hold bills including mortgage repayments and petrol. So our pay goes into that account.
    The “leftover money” is 100 a week so I devise this into thirds one third for us cash a week one third for savings and one third for emergencys like insurance excess, new Tyres car service but I have combined the emergency and saving money together in a interest bearing account where we get 4.95% on the balance at the end ofthe month, if we withdraw that particular month we get 3.5% then it resets to 4.95% the next month

    2) the emergency account should have 3 weeks pay in there as a minimum. At the moment we’re still saving for that!

    I think the envelope system is great too it’s all about dividing the left over cash and being brutely honest pen on paper all the bills you incurr in a year! You can’t be niave you won’t need a car service or may néed a trip to hospital!

    Next year in June marks 1 yr without a credit card (our worst trap we were spending more than we earnt) by then w want to co-controubye to our superannuation and get the government cocontribution of 1.50 for evey dollar we put in :).

    Jodi, Australia.

    3) our family assistance money evey fortnight pays for a groceries for the fortnight and I now shop at a farmers market which saves 100’s of dollars compared to the leading supermarkets.

    [Reply]

  7. Mary Ann says:

    I’ve struggled trying to use envelopes, recently I started using http://www.mint.com. This is a free budgeting tool that pulls in
    activity from my checking account. I only
    use this to track my monthly “envelope”
    expense. It sends emails when I’m getting close on my limits.

    [Reply]


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