Envelope System

Anyone who has read the Dave Ramsey books, has heard of the envelope system.  Matt and I have recently decided to give this a try... and let me tell you, it is so much harder than I imagined it would be.

Now Dave probably would not approve our system, but so far it is working for us and that is all that matters.  He says live on beans and rice and rice and beans... well easier said than done.  We have set a certain lifestyle that we feel comfortable living with, so we have tried to work around that. 

For example, Matt works overtime almost every week. He enjoys eating out for lunch on those days.  Dave would not approve of that, but I feel like if he is going to make a sacrifice like that for our family, he can go out and treat himself to something as small as lunch away from the office.

HOW TO GET STARTED

To start, Matt and I sat down and looked at our checking account to see where all our money was going.  Then we looked at our Budget spreadsheet (yes, I have a spreadsheet with our bills and savings information... I am a nerd!) to decide how much we can afford to live on to save the maximum amount each month.

I took how much we could afford to live on and broke it down to decide how much to put into each envelope.  Our envelopes are: Groceries, Matt Gas, My Gas, Dining Out, Matt Spending, My Spending, Conner Spending, and Miscellaneous. 

The reasoning behind the individual spending envelopes for Matt, Me and Conner was to allow room for us to buy the things that we needed and/or wanted.  If I need make-up or wine (I do need wine) it would come out of my spending money.  I gave Conner an envelope so if I was out shopping and spotted a good sale on clothes, I could buy them without cutting in to our groceries or such.

I gave ourselves a Misc envelope for several reasons.  One, we have big family that has a lot of Birthdays and social gatherings.  So I wanted some wiggle room for presents,  money to buy a bottle of wine to take to dinner, etc... Also, I wanted to have money in our account for things that you can't pay with cash.  Matt rides the train to work, but occasionally he has to drive in and pay for parking.  So instead of him using his money, I have the Misc fund in the checking account so he can just use his debit card and not worry.

WHAT WE DO

Every Friday I go to the bank and withdrawl cash for our weekly expenses.  I then divide the money up into the envelopes.  We have tweaked this a bit, our Gas money stays in our checking account.  I leave it in our account, because that is the one thing that we really don't overspend and it really sucks to pay cash at the pump with a young child.  I have to get him out of the car seat, walk inside to pay, walk out, put him back in the car and pump while he is yelling at me... NOT FUN!!! 

The hardest part of this system for us has been eating out.  I never realized how much money we actually spent on this.  We really enjoy going out after church or eating Mexican with the family, so we allotted ourselves a small portion each week to eat out at a restaurant.  

SUMMARY

Overall this system works!!!  It has made us very accountable for what we spend and how we spend it.  I also feel like it has brought Matt and I closer.  We have to communicate about what is going on with our finances, instead of getting to the end of the week and trying to figure out what happened to our money. 

I would love to answer any questions you have about doing this!