Katie’s Financial Wellness Tips: The Envelope System

Staying in budget can be SO hard, but now that you’re living a Zero Sum Lifestyle (every penny that comes in goes to something, even if that something is savings or investing), it’s incredibly important because a single penny overspent could mean bank fees and bounced checks!

Enter The Envelope System.

Twice each month, when we do our budget on payday, we allocate money to our envelopes.

In our family, we have the following categories:

Food: $200-$250/pay period: This is grocery store visits, but does not include Dining Out.

House: $100/month: These are “non-consumables”. I’m talkin’ diapers, shampoo, toilet paper, paper towel… please don’t be eating any of that stuff 😉

Blow: $50/month for the Hubby and I, each: Starbucks. Manicures. Make-up. Drinks with Friends. Fantasy Football sign-ups. You don’t have to justify where this money goes! It’s a sanity saver.

Kid Activities: $20/month, though I’ve found I haven’t been needing it since Christmas: Kids don’t really need much to be happy, but if they *needed* new crayons, it would come from here. If I wanted to take them out for ice cream, it would come from here.

Gas: $180/pay period to be split between our cars: We actually leave our Gas budget in our bank account so I don’t have to leave the kids outside while I run in to pay, but I keep the receipt tucked in a safe place in my car so I know how much I have left to spend before our next pay period. Sometimes, I even write “$X left until 2/10” as a safety measure.

Dining Out: $20/week for the Hubby: He gets $5 a day. Period. If he’s running low on funds for one reason or another (working OT so he has more meals to buy, or realizing it’s a 5 week month, or he has training and has no where to store or heat up leftovers), he gives me a heads up and I plan my menu around making sure I can send him with food. If he takes food some days, he can save his money for a nicer meal than Taco Bell (Chipotle, anyone?).

Dave Ramsey sells his own Envelope System, but I’ve found a solution that’s a) cheaper, and b) more durable.

Get thee to Target’s Dollar Spot and find one of the small coupon files! I opted for pink because I knew I could find it in my diaper bag/purse quickly, and well, I like pink.

Here is my well-loved (over 2 years old!) Envelope System:

Now, how on EARTH do you stretch the money in your envelopes??

Come back tomorrow to learn about the intricacies of the Food and House Budgets!

In the meantime, check out the other posts in this series:

No More Loans

Emergency Funds

Budgeting (Part 1)

Budgeting (Part 2)

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9 thoughts on “Katie’s Financial Wellness Tips: The Envelope System

  1. My husband and I started using this system once we bought our house. Boy has it been a lifesaver. We’re still perfecting our budgeting, but it’s so nice not to have to worry about how we’re going to pay for utilities, gas, etc. Highly recomended 🙂

    • Not.at.all! People spend an average of 12% more when they use credit (not to mention interest if it’s not paid off!). I can save that amount and accrue interest. “points” are a rip off. You have to spend upwards of $10k to earn one flight that would cost you $300.

      • Right now I have enough points to get us to dland this winter. So I am prepping for a new budget cleanse. T and I both have notebooks and are writing every cent we spend for the next 2-3 months. The we will see again where all our money is going and where we can cut even more! But I love earning my points!

  2. Wow – so cool Katie! Does this mean that everytime you get a paycheck you take cash out of the bank and you’re putting it in your envelope system?

    Do you never make online purchases?

    • We do make online purchases, but not for the categories we pull cash out for (yes, with every paycheck). We mainly buy online for gifts and we transfer the money from our sinking funds immediately after we do so. I’m going to talk about Sinking Funds on Monday.

  3. Hahaha, I was laughing out loud when I first read “Non-consumable” because I consider those consumables — as in, I “use up” diapers and paper towels and all that. But you meant I shouldn’t eat those. Thanks for the heads up. 🙂

    My question about the envelope system is, how do you handle a situation at the store when you buy groceries and (your category) of non-consumables? Do you figure it in your head first and pay from both of the envelopes in line, or do you just pay and figure it out at home?

    • It depends. If I am buying a $9.99 thing of TP, and I happen to have a $10 (or $11 to account for tax) in my House envelope, I take it directly from there. If I am buying a bunch of things, I’ll do separate transactions. I keep my food tally running on my calculator and my non-grocery tally in my head. to make things as fluid as possible at checkout, I like to have it figured out before I get there. If that means I have to do my calculations when I’m at home, then I do. Sometimes, especially with kids in tow, it’s simpler to do it that way.

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