Part 2 – organize your finances week… (creating an envelope system)

March 14, 2011

Yesterday your challenge was to create a budget!  Utilizing a budget is the first step towards financial freedom.  If you can STICK WITH your monthly budget, you will start to see your rewards of diligent planning turn into a beautiful debt free life.

Today I am going to share how to create an Envelope System!

I am not going to go into detail on Dave Ramsey’s 7 “Baby Steps” in my challenge this week (you can find that through his website), but I will “introduce” you to Dave’s plan. But first I want to share my story and how I got to where I am now.

My story:

Like Dave Ramsey, I did not grow up in a wealthy family.  My parents worked HARD in a blue color society and lived paycheck to paycheck. Even when they did have some extra money, they had a “poor” mentality and spent every last cent, as fast as they could. There was no such thing as a savings account in my home.  They did not have the tools to succeed with their finances (Like me, they were never taught).  I always ponder “what if” they would have known about Dave Ramsey’s plan.  What if they realized they didn’t have to live paycheck to paycheck, scrapping just to get by every month.  It’s a conscious choice to live with or without debt. Simply put, in order to change your family tree, you must learn how to use the tools (Thats where Dave Ramsey comes in the picture).  I obviously wasn’t taught those tools and made my own mistakes along the way.  My husband and I married young (we were 19 years old).  We were not used to seeing so much money come in (a lot to us anyways).  We were so excited on the 1st and 15th of each month (military paydays) that when we got a paycheck, we always went out and “shopped” each paycheck away. By the second week of payday, there was nothing left and we got accustomed to living on nothing for a week before the next paycheck came. I had a lot of nice clothes in my closet, let me tell ya! The sad thing was that after I bought the clothes, we didn’t have the money to go anywhere to be able to wear them to. The joke was on me. When the paycheck dwindled down, we didn’t stop there.  Soon, credit cards became our new best friend.  We were young, ignorant and we needed everything NOW!  We became slaves to consumer debt.  We didn’t have a budget. We didn’t have a plan.  We lived paycheck to paycheck, following the teachings (or lack there of) of our family tree.  That is UNTIL a couple of years ago… I was blog surfing one day and read about a man named Dave Ramsey.  I watched {this video}…  a video that changed my life! {Here} is part 2 of the preview.

After researching more about Dave Ramsey’s program in November of 2009, my husband and I finally decided that we were going to change our financial future.  We decided that we would no longer be chained to our debt!  We make way too much money (a 6 figure income) to be giving it away each payday (to debt collectors). We are not debt free yet.  We have only been on the Dave Ramsey plan for about 17 months.  We are currently on “Baby Step two”. We have paid off thousands of dollars in consumer debt, car payments, student loans, mortgage payments, etc… We are 75% paid off and 25% more until we can call Dave Ramsey and scream WE’RE DEBT FREE.  I’m here to tell you, we have learned from our mistakes. We are not perfect and splurge every now and then (a new laptop – wink), but we do NOT use or have credit cards anymore. We are a cash only family.  We are diligently teaching our children about financial freedom.  Everyone in my house knows who Dave Ramsey is! Second to our Heavenly Father, Dave is the most popular guy in our house. 😉  He has changed our family tree and I am forever grateful.

My husband and I stress to our children that you do not need credit cards to enjoy the finer things in life. You should save up your own money if you want to splurge on something new.  Don’t borrow it, only to have to take years to pay it back, along with the nasty interest thats added to it. The credit card companies are getting richer and the consumers are getting poorer.  Remember the times when having a credit card meant you were rich?  Or so we all thought.  How wrong were we! I tell my children that if you save NOW (even babysitting money), by the time you graduate from college, you may be able to pay cash for your first starter home. How awesome would that be? It may not be a big home, but it will their home free and clear. Only time will tell, but my prayers are that my kids will use the tools we have been teaching them and they will never have to work a day in their lives, just to give their hard earned money to someone else. I hope you get something out of my story.  You may even relate?  My goal is to inspire you and open your eyes up to “options”.  There are other choices, besides stressing over debt. You can become debt free.  You just have to take “Baby Steps”.

Dave Ramsey’s 7 Baby Steps:

1. $1000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. 3-6 months of expenses in savings
4. Invest 15% of income into Roth IRAs & pre-tax retirement
5. College fund for children
6. Pay off home early
7. Build wealth and give!

In order to start the Baby Steps, you need to FIRST create a written budget (we already did that yesterday).  If you would like to learn about Dave Ramsey’s plan, you can sign up for a Financial Peace University course at your local church or visit his website for more information. You can get started by reading Dave’s Total Money Makeover or Financial Peace Book.

 There are also some other great people out there who are sharing how to become debt free. Dani Johnson is one of them. I’m reading her book, Spirit Driven Success, right now. I LOVE, LOVE, LOVE it & highly recommend it to everyone. Dani reveals biblical secrets to achieving financial freedom.

Dani was on the season premier of Secret Millionaire last week. {Here} is the FULL episode & her story. I promise, you WILL BE inspired. 🙂

Todays’ challenge:  Create a cash envelope system!

Switching to cash instead of using your debit or credit card will help you control your spending. It did me!  Try it for one payday and see how much money you will save. You will be amazed!
*I do not use cash to pay our bills.  I pay everything via online banking. The envelope system is for our spending allowance.

{Here} is the envelope system explained step by step from Dave Ramsey. 


You can use any type of envelope system that fits your style & budget. An envelope is an envelope. As long as you are organized, whichever one you choose will work just fine.  I have a few examples to share with you today. 

Someone who is super creative in making plain envelopes look stylish & pretty is Jen from   She uses her envelopes for couponing.  They are perfect for a cash envelope system. 

Dave Ramsey also sells Envelope systems on his website {here}. I personally use the Deluxe system (shown below). (psst… its in the giveaway pack this week).

One very inspirational envelope system is by  She shows step by step, how to create the system below. She also sells it {here}.

She even has free downloadable labels {here}


 It’s up to your specific situation.  I have 5 envelopes.  I fill mine 2 times a month (once each payday).  My budget for the month tells me “how much” to put in each envelope. I try to use the absolute minimum $ each payday and pay off debt with the rest. For example… I allot only $125 per week for groceries.  It may not seem like a lot, but after using coupons, I almost get twice as much food!

1.  Food
2.  Gas (its a pain to pay gas with cash, but you will get used to it)
3.  Entertainment
4. Clothing 
5. School expenses (lunches, fees, etc)

Like Dave says, once the money’s gone, ITS GONE!!!!!  In time, you will learn to say no to un-necessary stuff, because you have no money left in your envelopes .  (NO borrowing from another envelope or your savings account. It would defeat the purpose of using the envelope system in the first place).  If used correctly, this system will help you to save money, pay off your bills, and become debt free!

If you would like to share pictures of your envelope system,  you can link up your post on the first day {here}.

Good Luck creating your envelope system!

*There is a GREAT {online ehow article} with step by step instructions on how to use the envelope system.  It may be different than the Dave Ramsey plan, but it will help you to understand the general logic of the “envelope system”.

27 comments on “Part 2 – organize your finances week… (creating an envelope system)

  1. Melissa says:

    We recently returned to the envelope system after stepping away from it for a few years. We are out of debt (except for our house), but it’s so much smarter and more freeing to stick with the envelopes! I’ll put a picture of my handmade envelope system wallet on the first post.

  2. Jamie says:

    Yay. I’m so happy I found your site. I’m a new follower and I am definitely bookmarking this post. My husband and I just recently started the envelope system and this is perfect. Thank you for sharing the tips and links. I appreciate it. Hope to see you over at DIY Home Sweet Home. I am having a link party today and every Monday so be sure to stop by and see all of the great projects.

  3. I can NOT get my husband on board. He doesn’t want to have to wait two weeks to get something he wants.

    anyone have the same problem?

  4. Toni says:


    Get him to watch the “intro” dave ramsey video that I linked up today. Also see if he will read Daves Total Money Makeover book (you can get it from the library).

    Good Luck!

  5. Toni says:


    Your envelope system is AWESOMEEEEE!!!!

  6. Rochelle says:

    My husband likes Dave Ramsey, but does not want to go to cash only. We don’t use credit cards but debit cards and I would love to go on cash budget. He’s not sold on that one just yet. But we are snowballing!

  7. This is great! I made our own envelopes and they turned out so pretty that I LOVE to use them even more. We are starting this journey now and we vow to NEVER get in debt again!

  8. Annette says:

    A couple years ago my husband started a portion of this system and we still live by it! I works and it becomes second hand nature to where the thought of using a credit does not exisist. Thanks for the refresher as I am challenged to go deeper in the system for this year.


  9. This sounds like a good system… I would be afraid of losing my envelopes, though! If my wallet gets stolen/lost, I can just cancel my debit card… Can’t do the same with cash. I wish there were a way to adapt this system to debit cards.

    • Anonymous says:

      Some banks allow you to have up to a certain number of checking accounts… Maybe that would work? Just make sure there wouldn’t be any fees or anything with the accounts, and you could do that. Just have to remember which card is for which account (some banks have personalized cards you can get for each account) or see if you can use multiple banks? It’s more of a pain, but could be an option if you dont like sites like mvelopes or mint….

  10. Toni says:

    You should try then. Its good for those who dont want to carry cash but still want to budget.

  11. fsuchristy says:

    My husband and I tried the envelope system a few months ago but weren’t very successful. We kept forgetting our envelopes when we went out. Plus we were just using plain mailing envelopes- they were so boring! You just inspired me to try again, with cute envelopes this time. It’s the simple things that motivate me! 🙂

  12. Thanks for the link-up!! Yeah, the template is totally free and always will be. I get excited when others switch to the cash system, because it has totally changed our lives. I also sell pre-made envelopes in my etsy shop!

  13. Kim says:

    I am starting a new phase of my life and am reading about this cash envelope system now. Thanks for the post

  14. nickeylynn70 says:

    I have just discovered your blog and made my envelopes. My question is this, going on a cash system, what do you do to make an online purchase? Take the money from the envelope and put it in the bank to cover the debit charge? Just seems like more of a hassle than paying cash for gas.

  15. So glad I found this! My husband calls me the Dave Ramsey Nazi! We switched to the envelope system over a year ago and it has changed our lives! We are on our way to being debt-free (minus our mortgage). We still have a ways to go because we had about $90,000 in school debt, but we will never go back to our old ways. that just seems so silly now that we are doing it Dave’s way. We use about 14 envelopes because for me it is just easier to break it down into more specific categories (vacation, Christmas, clothing, doctor’s appts, housewares, pets, etc.) I keep most of them at home and just take the ones that I need when we go to the store, or if I have an emergency and forget the envelope I will use money from a different envelope and return the money to the correct one IMMEDIATELY when we get home!

    @nickeylynn70- when we must make an online purchase (hotel booking, online clothing purchase, etc) we just use the debit card and then take the money from the correct envelope and put it into a seperate envelope that we have labeled “DEBIT CARD” for any money that needs to go back into our bank account. Also, we use our debit card for gas.

    It may seem like a pain in the beginning but as soon as it becomes habit, it will only be natural to pull out your envelopes! Toni, thanks for posting about this 🙂

  16. starla says:

    wish I could buy the pretty one premade….making it doesn’t interest me but the dave ramsey is kinda boring lol

  17. KeishaCory says:

    Im struggling to do this but I know I need to! Its just so easy to swipe that debit card in a hurry. But its costly! Thanks for the post!

  18. JillMS says:

    How/Where do you start, we never have cash because we are always paying the bills. This is something we want to start but I just see how you start. Do you have any pointers or do I have to read the book first. Just found this blog today and love all of it.

  19. Brandie Nava says:

    I love Dave Ramsey!! Life Changer!

  20. Becky Perks says:

    I was wondering, and maybe you have already answered and I just missed it, but what do you do if you dont spend the whole amount in one of the envelopes, say for groceries one week?

    • Admin says:

      I spend about $150 per week on groceries for our family of 5.

    • Becky says:

      My hubby and I leave it in the envelope to help out on a week where we may need to make a bigger purchase (we love buying stuff like TP in bulk….) I know others take it and apply it to their debt snowball money.

  21. Beth says:

    Hi – I have recently changed my households spending and am determined to make it work. What does step 3 mean exactly. Sorry – I’m a little confused what it means. 🙂

  22. Jen says:

    $125 a week for groceries… try doing $230 a month 🙁 I keep looking up all this stuff about budgeting and saving, hoping to find some sort of trick to help us in our time in need, and all I keep encountering is that we do not make enough compared to everyone else. If I made this kind of money, we would never have financial issues in the first place.

    • Sara says:

      Hi Jen, I was just reading your comment for the first time. Have you considered WIC to help with groceries?

    • Sara says:

      Oh, Jen, see my comment below. That was meant for you. I know how stressful it can be trying to get groceries to feed yourselves and maybe even a family. I remember scraping up $.89 in my car trying to find enough to buy eggs at a discount mart. If yuo haven’t considered WIC, I think it could help.

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