Author Topic: Dave Ramsey Envelope System  (Read 3574 times)

Offline BiggBake

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Dave Ramsey Envelope System
« on: November 17, 2012, 05:25:31 PM »
My wife and I have some credit card debt that we want to get rid of.  We are wanting to start the Dave Ramsey envelope system on Jan.1st.  Does anyone here have experience with this?  If there are already a ton of threads on this subject, please point me in the right direction.

Thanks!
BiggBake

Offline Roundabouts

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Re: Dave Ramsey Envelope System
« Reply #1 on: November 17, 2012, 05:57:15 PM »
Sorry I can't give you first hand info.  I just thought you may be interested in www.MrMoneyMustache.com  I have found some pretty good tips on that web site.   
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Offline Twibble

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Re: Dave Ramsey Envelope System
« Reply #2 on: November 17, 2012, 06:52:01 PM »
I had to write this on the outside of all my envelopes:

"No visiting, sharing or hanky-panky with the other envelopes. Everyone must behave and stay in their own envelope." - DR Mail 9/21/10

We need to go back to the envelope system again.  I did much better at not overspending on groceries.
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Offline FrugalFannie

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Re: Dave Ramsey Envelope System
« Reply #3 on: November 17, 2012, 08:15:26 PM »
I wouldn't call it Dave Ramsey's Envelope System. My mom taught me this because it is what she did. Why wait until January to start?

I use this system now. I used to use it. Got off it. Back on it now.

I make an envelope for each expense and then write on it how much I expect to put in each paycheck. So Groceries is currently at $$$/check. Car payment is $$/check and so on.  Make sure you plan for annual expenses too. Vehicle registrations, life insurance, auto insurance, etc. I break it down to how much needs to go in each paycheck. Gifts get an envelope, vehicle maintenance, savings and preps to name a few.


Offline TXChikk

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Re: Dave Ramsey Envelope System
« Reply #4 on: November 17, 2012, 09:05:58 PM »
I too have used this (learned it from my parents and grandparents) gotten away from it have recently returned to it. I discovered after paying off some debt and having more cash I tended to spend more but when I see Exactly where my $$$ needs to go and how little I have left I can save and be frugal like nobody's business. It's simply helpful to see actual cash go into an actual reserve rather than writing on a tablet with addition and subtraction.
BJ

Offline Wild Colonial Boy

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Re: Dave Ramsey Envelope System
« Reply #5 on: November 17, 2012, 10:46:33 PM »
The Dave Ramsey system sounds pretty much like the budgeting system we have used for over a decade.  I should have put out a TM on the system  :D

It seems budgeting is a bit of a dirty word and people look at you funny if its mentioned because most people I know don't budget, live off their credit card month by month then pay down at the end of the month.  Alternatively they do budget but can't stick with it because their cash management system is complex, online or unrealistic...

Our budgeting works because we allocate every cent from my salary and we phsically put 75-80% into envelopes each fortnight (we used to use standard letter envelopes and now use snap-lock bags...they hold more and can be secured).  Once we do the fortnightly budget the whole lot is secured in a safe.

The system works fantastic because you only spend what you have saved and it makes you plan out those larger purchases rather than just grab the credit card.  An additional bonus to this system (which I haven't mentioned to my wife) but if the SHTF and banks were not issuing money for whatever reason, you have a sizable amount of cash on hand at any given time.

I would encourage you to give it a go not only for the extra debt your trying to pay down but for managing all your money.  Oh and don't bother by Dave Ramsey's fancy envelops on his website or Amazon, just use what you have in the Kitchen or your Study  ;)

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Offline MaddoginMass

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Re: Dave Ramsey Envelope System
« Reply #6 on: November 18, 2012, 06:15:27 AM »
My wife and I started using this system 3 or 4 years ago after I read Dave Ramsey's book.  We picked up a cheapo large plastic envelope/organizer.  No need to get something special, as Wild Colonial Boy said. 

The system is great and now has become a natural part of our finances.  We now know exactly how much money we have to spend.  I highly recommend it.  I'm sure it is not for everyone, but it definitely helps us. 

I agree with others, don't wait.  Start it now.......

Offline Saint-TyR

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Re: Dave Ramsey Envelope System
« Reply #7 on: November 18, 2012, 07:39:52 AM »
Debt is dumb and cash is king! Never forget it... The system works and you can do it with a cheap organizer. We have been doing the TMMO for three years. The hardest part is buying prep and paying down the debt. So we created a preps envelope. It works so do not give up and like everyone else has stated "START NOW"!

Stay safe!
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Offline cheryl1

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Re: Dave Ramsey Envelope System
« Reply #8 on: November 18, 2012, 08:10:39 AM »
We did the Dave Ramsey thing, and tried the envelopes. It just didn't work well for me. What I do now instead is take out X amount of spending money for the next two weeks. I do all the shopping, so that keeps it simple. It just wasn't very effective for me to have a food envelope and a prescription envelope, etc. What I found happening was I would go to town and forget the cash out of one envelope. If I can't use creative accounting with the budget cash I have on hand, then that means another trip to town. When town is 45 miles away, it only takes a couple of times to wipe out all you saved in extra gas. We do have a budget for every penny, but I just keep the daily living expenses all in one category (instead of medical costs, clothing, food, pet food, cleaning supples, etc.).
I've seen the village and I don't want it raising my children.

Offline ID_Joker

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Re: Dave Ramsey Envelope System
« Reply #9 on: November 18, 2012, 10:35:03 AM »
I use quicken for an virual 'envelope system'.  It has a feature called 'savings goals'.  When you put money into one of these shadow accounts it subtracts it (virtually) from your checking or cash pile or whatever.  It lets me see and budget for all of my different categories of expenses without having to actually have a thousand envelopes floating around.

Offline cheryl1

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Re: Dave Ramsey Envelope System
« Reply #10 on: November 18, 2012, 10:39:40 AM »
I do a similar thing. I "tag" money in our checking account for bills and savings needs that are upcoming. Drives my husband crazy.
I've seen the village and I don't want it raising my children.

Offline bigbear

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Re: Dave Ramsey Envelope System
« Reply #11 on: November 19, 2012, 10:01:24 AM »
We've been doing cash based spending for years as well.  Surveys have shown that you spend less when using cash vs check vs credit card.  In addition to the physical limitation of what is in the envelope, there's something emotional about buying stuff that's harder to resist without the boundaries.  And physically letting go of the cash (vs virtual money) both counters the emotions as well as allows you to think about the purchase (i.e. going to the atm or whatever) if your instinct is not to use a credit card.

*** I would start ASAP (especially heading into the holiday spending season).  ***

1. Have a meeting to write out a budget.  Anticipate a fight if it's your first time really looking at money with your spouse...  Talk about it ahead of time and your common goals.  See what you're fixed expenses are.  There are plenty of generic ones online you can Google to give you a head start.  Do you NEED to have your fixed expenses?  Are you on the same page with many common goals?  Make you talk about how much cash you 'need' for each category.  IMO, start out using a few envelopes (food, entertainment, gas, etc) for your normal day to day type purchases.  Don't worry about an envelope for stuff like saving for a chainsaw, lawnmower, vacation... 
2.  After you've determined how much cash you 'need' each week/paycheck, withdraw the total amount from the bank and put that in each envelope.
3.  Commit to not using credit cards or shifting money back and forth.  Commit to a spending limit that you don't make impulse buys from (we've done $50 for the longest time - even items you're passionate about - Yes, I'm talking to the gun enthusiasts!  :) ).  Then keep receipts of what you spent your money on for that first 'cash cycle.'
4.  At the end of that 'cash cycle' have another meeting to assess how you did.  Do you really NEED that much money in each envelope?  Do you NEED more cash in a few envelopes?  Are you spending your cash wisely?
5.  Reassess after each cash cycle until you and your spouse are comfortable with the cash amounts and each others discipline.  At that point, you can cut back on the assessment to be once a month (when you're doing the bills).  And you can probably stop saving the receipts .

My wife and I basically started out like this but over time we've adjusted it a bit.  We now do one 'envelope' where we just pull out a total cash amount and we've decided to do credit cards for gas for the car (convenience/non-impulse) and 'savings' purchases (like the lawnmower).  But we do cash for stuff like food, entertainment, Christmas where there is an impulse/emotional pull.

We keep a ledger/budget on Excel similar to this.  The first line are your 'accounts', the second is your starting point, 11/2 and 11/16 line are paychecks, 11/9 is the envelope cash, 11/23 are bills being paid and envelope cash.  There's a running total of what you're saving for at the bottom (new car, car insurance, gifts, lawnmower), and you've accounted for every dime of your paycheck.  It's a good place to see allocations for your emergency fund savings too.  (I was just throwing numbers on this spreadsheet, so don't get stuck on the numbers and categories.)

   Mortgage   Food    New Car   Car Insurance   Gas (car)   Gas (house)   Gifts   Lawnmower   Debt   Total Activity   Ending Bal
Begin Bal.   200   100   0   0   0   50   0   200   0   550   550
2-Nov   500   200   100   50   50   40   25   10   25   1000   1550
9-Nov      -200         -50               -250   1300
16-Nov   500   200   100   50   50   40   25   10   25   1000   2300
23-Nov   -1000   -200         -50   -80         -50   -1380   920

Total    200   100   200   100   0   50   50   220   0   920   

Enjoy the journey and celebrate the victories!
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Offline snickers

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Re: Dave Ramsey Envelope System
« Reply #12 on: November 25, 2012, 09:25:25 PM »
I use it. It really does help you send far less. I think it annoys the cashiers and the people in line behind me because it takes about 30 seconds extra to stuff the money back in your envelopes. Small business owners appreciate cash transactions because they get dinged for every credit card transaction. I even pay my chiropractor in cash sometimes because of that!

People my age (early 20s) have this mentality that it's dangerous to carry around cash. I think it's more dangerous to carry around a credit card. I do keep my credit card in its own separate sealed envelope for actual emergencies. I have "DON'T DO IT!!!" written across the front. It actually works for me. I do the Dave Ramsey specific budget with "blow money" I withdraw half of this in cash and leave the other half in my checking account because I do a lot of my shopping online.

I agree with everyone else who says do it now. December is just around the corner so it's a perfect time for you and your wife sit down and write a December budget. Remember to leave room in the budget for holiday gifts!

Offline jjs72

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Re: Dave Ramsey Envelope System
« Reply #13 on: November 26, 2012, 01:46:55 AM »
My father inlaw, developed a software that we have been using for over 13 years. It is based on the old envelope system. He started it with a Mac IIe. The web link, www.snowmintcs.com. I get no commision or any type of monies, for promoting the software. I promote it for the simple fact it has saved our butts a few times. Now, we are on the path of paying off all debt, not including our mortgage in the next 10 months. Then we start hammering the mortgage, and it will be paid off in roughly 4 years and 9 months. My wife and I, want to go into our 50's, having no debt. Though, this depends on the economy doesnt tank between now and then. We do see light at the end of the tunnel.   

Offline bigbear

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Re: Dave Ramsey Envelope System
« Reply #14 on: November 26, 2012, 08:24:31 AM »
Remember to leave room in the budget for holiday gifts!

Slight/significant adjustment:  Remember to leave room in the budget for holiday gifts!
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Offline BiggBake

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Re: Dave Ramsey Envelope System
« Reply #15 on: November 26, 2012, 04:17:38 PM »
Thanks for all the tips.  We pay 95% of our bills on line.  Should we keep that money in our account to continue, or should I quit paying our bills online and start sending in money orders?

Offline Morning Sunshine

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Re: Dave Ramsey Envelope System
« Reply #16 on: November 26, 2012, 04:31:49 PM »
pay online what you can.
most bills are pretty standard - phone is $xx/month, sewage is $dd, etc.  even power is fairly predictable month to month.  The envelope system really works best for those things that you can control with cash.  turning off lights and unplugging vampire appliances can help, but really, you are not going to spend more on power than you would if you took a money order to the power company.  But cash WILL make a difference at the grocery store, at the mall, etc.
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Offline snickers

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Re: Dave Ramsey Envelope System
« Reply #17 on: December 01, 2012, 10:52:52 PM »
Slight/significant adjustment:  Remember to leave room in the budget for holiday gifts!

Thanks! I actually read that before doing my December budget and it reminded me to specifically budget for Christmas gifts. Because of that reminder, I also budgeted a little bit of money to do a "giving tree" present!

I saw some small "coupon organizers" at the dollar store today that were essentially small accordion folders. I think that they would work pretty well for the envelope system. $1 vs the $10-20 you may end up spending on a fancy envelope organizer sounds pretty good to me.

Offline busymomx3

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Re: Dave Ramsey Envelope System
« Reply #18 on: December 09, 2012, 12:29:30 AM »
We used the envelope system when saving for our house and it worked great.  I have tried a couple other times to get back on track.  It takes us a month or so to get going again when we use it.  I always forget to budget for gifts :(.  I recommend it to all my friends because when you are spending cash you really do spend less.  Your more aware of how much you are spending.  This go round we are not taking out gas cash because I got to work so early in the morning and do so much "single mom" time right now.  Getting three kids out of a car to pay is a hassle.  But otherwise groceries, preps etc go in their special envelope in my fire proof safe and go with me when I need to get something or pay something.  I also have a full budget written out to ensure everything gets paid.  Good luck.  Its a great system once you get the hang of it and don't spend the cash :).

Offline hebert

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Re: Dave Ramsey Envelope System
« Reply #19 on: February 16, 2013, 03:40:29 PM »
It works well for me.

Offline Melting

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Re: Dave Ramsey Envelope System
« Reply #20 on: February 19, 2013, 08:28:28 PM »
We use Mvelopes, $95 a year online envelope accounting system. Over the past three years we have paid down over 130,000 in debt and have only two mirtgages left to go.
Best part is we pay all our bills once a month in about 15minutes and have 0 money stress.
I cant recommend the product highly enough.