The envelope method is something you’ve probably heard of before if you’ve read/watched/seen anything with Dave Ramsey.
We’ve gotten more serious lately about wanting to pay off our debt, and I’ll be honest it’s felt unmanageable to me in the past, but now it feels like we have a plan and I’m excited to tackle it! We have a car loan, medical debt from my c-section, credit card debt :(, and of course our student loans. We are planning to tackle this using the snowball method (another Dave Ramsey thing), and the envelope method is one component of this plan!
Here is what we are doing for the envelope method!
STEP ONE: CREATING YOUR BUDGET
The first thing you need to do to get started with the envelope method is to create a budget. We listed out our full monthly income, and then subtracted out our expenses. Whatever was leftover was put into different budget categories. Then we wrote those budget categories onto envelopes and the amount as well. Any bills that we are paying online we did not create an envelope for. Here is some examples of what we have envelopes for:
Groceries-400 a month
Gas-50 a month (we both don’t have to drive very far for work!)
Daycare-400 a month
Savings-200 a month
Spending Money- 80 a month- 40 each
Clothing-50 a month
Toiletries-40 a month
Baby Supplies-40 a month
Pet Supplies-5 a month
Car Insurance-75 a month toward our 6 month payment
Eating Out-50 a month
STEP TWO: GET CASH OUT
For us, it makes sense to get cash out every other week, and then stuff our envelopes. This means physically driving to the bank and making a withdrawal. To be honest, this almost put me off to the whole process, but now that we’ve done it a couple times it’s really not that bad! And I think the benefits outweigh whatever negatives there are.
STEP THREE: ENJOY FINANCIAL FREEDOM
That’s pretty much it! The only other drawback, is remembering to take cash out of your envelope when you need to spend money from a certain category. The reason I think this works so well for us, is because we are forced to not spend over our budget, We don’t have the cash to do it, and we know that we can’t put it on our debit card because we would go over budget! Using physical cash really helps us to slow down and think about what we are buying .
I’m excited to continue this method and see if we can manage our money a lot better! I’ll definitely post and update and let you all know how it’s going in a couple months!