Monday, July 6, 2009

Saving Money: The Envelope System

This Monday I would like to introduce you to the system I use to run our household finances. A few months ago, I started the envelope system, which many others (like Emily) have also done and had much success with. Before using the envelope system, we would put enough money in our account to pay the bills and put some in savings, and just kept the rest. I had a spreadsheet of our monthly bills and checked them off as I paid them. The envelope system is similar, except every part of our lives is now given a limit and the rest goes to savings. So far I have been able to save $200 more a month than before. For an example, I have the following envelopes

- my money
- Scott's money
- groceries
- pets
- pharmaceuticals
- home improvement
- fun money
- bills (electric/water, gas, garbage, cable, cell phone, gas for vehicles, student loan)

My bill envelope is actually the checking account. We pay these bills online or by mail, so that money needs to stay in the account. Those bills are also always set amounts, so I know exactly how much needs to stay in there. Everything else comes out in cash and then gets placed in the appropriate envelope. Any leftover money goes straight into the savings account. I like using cash to pay for items instead of with the debit card so that I actually see how much I am spending. It makes me think twice about what I am buying and if we really need it.

Even if you don't have an issue with saving money, try this out... it will help you see what you spend and where it goes and may make you think twice about purchases and how much more you could be saving.

1 comment:

Meredith said...

For me, paying with cash has been the MOST helpful when it comes to groceries, hands down. I find that I make much smarter (and healthier) choices if I take cash along and only allow myself to spend that amount.