I have mentioned that we use Dave Ramsey's envelope system for our spending before, but I get asked a lot of questions about them. I thought I'd say a few things about using a cash system and then show my new envelopes! We took the Dave Ramsey financial peace university offered at out church. I like Dave because his program is for every level of income. The cash system is not his invention, past generations did it religiously. This is just one part of his class.
Here's the basis: You run your family fiances like a business does. You don't spend what isn't in the budget. Just about everything is a line item on your budget. So, each month we sit down and allot a certain amount for tithe, housing, different utilities, student loans, grocery, gifts, entertainment, car maintenance, clothing, etc.
When the new month starts, I go to the bank and take out the appropriate amount of cash to fill the envelopes (as per the budget, not just whatever I want!). I put the correct amount in the correct envelope. When I shop, I spend cash from the envelopes. If I run out of money, I don't have anything to spend.
this is the question I get asked most.
Q: what if you need something and you don't have any money left in that envelope?
A: I am careful to not spend carelessly so that there is money for things we NEED. What you NEED and WANT are better prioritized when you see the money and how much you may spend that month. Also, if there is a true emergency, Dave teaches that you have set up a $1000 emergency fund in advance- so there's that. but, a new throw pillows are not an emergency. If i want new throw pillows, I can work that into the budget.
Q: no really, what if you run out of grocery money... you have to feed your family...
A: right, no ones going hungry here. I am really careful to be frugal about our grocery money, especially early in the month. When we get to the third or so week, I can see how it's going and see if there's leftover to buy fancy cheese or take us all out to eat. We may get to the third week and I see that we better see what's in the freezer or in the back of the pantry so that there is enough. One month, I didn't spend as well, I guess and we had to raid the entertainment envelope for a little extra cash. We could have just used the debit card and taken it from the bank, but that would have blown the budget for the month. We have had to raise the amount in the grocery envelope since food prices have risen some and Lou eats as much as Bee now. That amount had to come from somewhere else in the budget (a little less went to the vacation fund or less went into the clothing envelope)
Anyway, I've been using the envelopes we got with our class kit... I decided to make some cuter envelopes using scrapbook paper. I just opened up one of his envelopes and made a few changes to the design and then traced several times, refolded and glued. I really like how they turned out.