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I first saw the envelope system on the Gail Vaz Oxlade show “Til Debt Do Us Part”. It’s a pretty simple premise: you create your budget, divide the amount of money you have for variable spending, put it into either weekly or monthly envelopes marked with the category name and when it’s gone, it’s gone. No more. Do without!
Dave Ramsey also uses this premise and teaches that “One of the reasons we overspend is because there’s nothing telling us when to stop. That’s where the envelope system comes in. It’s one more tool in your arsenal to help you stick to your budget.”
With the above linked budget template, you simply plug in your gross income, the fixed items you pay – rent, mortgage, property taxes, car payment, etc. – and then the spreadsheet calculates the recommended percentage for each of the variable items. That gives you the amount for each category for your envelopes.
You can keep count of your envelope amounts in a couple of ways. Create a budget binder where you have one category per page and keep a running total of how much you spend. You can also just write on the envelope each time you spend from it. I have a running total worksheet for my Filofax, which you can download here.
Using the envelope system is a hands-on way to keep track of your money. I’m a visual person so I need to write things down on paper rather than my phone in order to make connections.
I hope the budget spreadsheet exercise will help you get, and stay on, track!