My husband and I are fans of talk show host and money guru, Dave Ramsey.  In fact, he is the at the source of most of my blogs about budgeting and finances.  One tool Dave employs in the use of “money envelopes”.  My husband and I have incorporated these tools into our budget and have achieved success and have come to rely on our envelopes daily.

The envelope system is based on the fact that most people are more aware of what they are spending if they are using cold hard cash.  The feeling of handing over two $100 dollar bills for a purchase at the mall stings more than running a debit card and punching in your PIN. I know as a mother, I actually see “cash” laying on the floor of my daughter’s room in the form of brand new jeans and t shirt!

I am what Dave Ramsey refers to as the “nerd” and my husband is the “free spirit” which means that I love to look at and crunch the numbers and he is happy having me do just that!   But, every month, the two of us sit down and look at the next months bills.  We take into consideration any thing special coming up.  For example, we had to add Mother’s Day gifts for the moms in our family and for our daughter’s birthday.  This reminds us that birthdays and holidays are NOT emergencies and come at the same time every year so we should plan for them.  That being said, we look at our budget for the month, add in anything that can come up every few months like insurances, car registrations, birthdays. or even utility bills that have a high fluctuation during certain months.

During this time we talk  over the budget calmly and rationally and coffee and pastries are always welcome!  After we establish our budget, at the beginning of the month, (we are self employed and schedule our paydays on the first  of the month) I set up the bills to be paid on line, write checks for other bills, and withdraw all the cash we have set aside in the budget for groceries, dining out, gasoline, holiday or birthday, clothing and “misc”.  I take the cash and put the amount we agreed on into different envelopes. When I go to the grocery store, I take my envelope and buy my groceries and, if at the end of the month we are running out of grocery money, it’s time to get creative! If we are out and about and my daughter wants a cold drink or I want a coffee, we check our dining out envelope and if there is cash we can enjoy a treat!

As the mother of a tween daughter, buying clothes are always an issue, but with an envelope with cash, she can see how much we have allotted for ALL OF US that month!  Our gift/holiday envelope keeps up to stay within budget when buying presents for friends and family.  I also realized that we buy gifts for people who we love and love us and they would never want to know we spent more than we could afford on them.  The “misc” envelope is just that; miscellaneous items.  We also use it if we do not have enough in the other envelopes. For example, we are almost out of cash in our dining out envelope but haven’t touched our misc envelope.  Tonight is going to be crazy with 3 of us going in 3 different directions and I am using some misc cash for Subway sandwiches!  Done deal! At the end of the month we can see if we underestimated or overestimated in certain areas and can plan even better for the next month.

At first I was worried that people would think I was an idiot carrying around my envelopes, but most people are curious and my envelopes have become quite the conversation starter!   The best part of using this tool is that since we have been using our envelopes we have stayed within budget EVERY month!  We have have cash in our checking account at the end of the month as well.  We have put a stop to spending without thinking.  We have learned the difference between a need and a want.  We have all come together as a family to live the best life possible, be creative and take care of our resources.

Give it a try for one month and let me know what you think!