I am a believer in Dave Ramsey's system. We have used it many times to pay down debt. A few months ago, we had gotten behind on our mortgage and our bills. We were struggling. My husband sat down and made the budget until the end of the year. (I'm talking about 4 months or longer). We stuck to the budget and did not buy any extras. We started the envelope system. I have heard about it through Dave's seminars and I have even sat in on a 12 week class and attended every one of them! My husband decided to put it into motion this time. We had an envelope for all of our utilities, our mortgage, gas for our vehicles, and food. We added up the expenses for the month and divided that total by the total of weeks in each month. What my husband did was budget weekly what we would have to have going towards the utilities, etc. Example: If our electric bill was going to be around $200 for the month, we would put in $50 each week going toward the electric bill. That way, when it was time to pay it, we did not have to come up with the whole amount out of one paycheck. We did this for all of the subjects, including our mortgage payment. Within a couple of months of doing this, we were back up on our feet again. Now, our mortgage has been caught up and believe it or not, this month, we will have the money a week ahead of schedule. We have been paying it automatic draft and on time the first of each month. We have even been paying ahead towards the principal.
I strongly suggest checking out Dave Ramsey's envelope system and read some of his books. He has a radio show you can even listen in on.
Here is some information about his envelope system.
Dave Ramsey's Envelope System
On a budget? Still over-spending? Trying to figure out the best way to organize your finances and spend wisely?
Get on a Simple System
I found out that Grandma's way to handle money still works. People used to always use cash envelopes to control their monthly spending, but very few do in today's card swiping culture. The envelope system is a key component of the Total Money Makeover Plan because it works. Here are a few simple basics for starting a cash envelope system:
1. Budget each paycheck. Budget is a dirty word to most people, but you must budget down to the last dime if you're going to successfully implement the envelope system.
2. Divide and conquer. Of course, there will be budget items that you cannot include in your envelope system, like bills paid by check or automatic withdraw. However, you can create categories like food, gas, clothing and entertainment.
3. Fill 'er Up. After you've categorized your cash expenses, fill each envelope with the money allotted for it in your budget. For example, if you allow $100 for clothing, put $100 in cash in your clothing envelope for the month.
4. When it's gone, it's gone. Once you've spent all the money in a given envelope, you're done spending for that category. If you go on a shopping spree and spend the $100 in your clothing envelope, you can't spend any more on clothes until you budget for that category again. That means no visits to the ATM to withdraw more money!
5. Don't be tempted. While debit cards can't get you directly into debt, if used carelessly, they can cause you to over-spend. There's something psychological about spending cash that hurts more than swiping a piece of plastic. If spending cash whenever possible can become a habit, you'll be less likely to over-spend or buy on impulse.
6. Give it time. It will take a few months to perfect your envelope system. Don’t give up after a month or two if it's not clicking. You'll get the hang of it and see how beneficial the envelope system is as you dump debt, build wealth, and achieve financial peace! See....simple!
Certainly, some bills may come in at different times of the month, so you'll need to adjust your written game plan to take it one step further. You need to plan the budget based upon your pay periods.
Say that you get paid twice a month. If you can write down which bills you plan on paying from each paycheck, you will not be left with a surprise bill. Spend each month's income and each individual paycheck on paper BEFORE it comes in.
Have Some Fun
I also have no problem with you adding an envelope with money just to have fun with! As long as you and your spouse have agreed on it, you are fine. There should be no lying. Agree on your budget, agree on your fun money, and be open. Fun money can be anything you want it to be. There are no rules on that envelope, unlike money in the "entertainment" envelope that is used specifically for entertainment.
What people are saying about the Envelope System:
* I have noticed that since I've started using the envelope system, I'm spending about $60 less per two-week period than when I used a debit card. I think it's because when I lay three $20s down for groceries, IT HURTS! When I paid with debit, it didn't really register with me. - My Total Money Makeover member mgtyjoe
* I finally know where every dollar goes, and I love it. - My Total Money Makeover member rb4580
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Source:DaveRamsey.com
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