The Envelope System

Our family's budget is based on the envelope system.  This means that we pay cash for everything, from groceries to date nights.  At the beginning of each month we take out a certain amount of money for our envelopes.

My hubby gets two paychecks a month.  The first paycheck basically covers our envelopes, and his second paycheck covers our rent.  The envelope system can also work on a week-to-week basis, if that's the situation you're in.  You could even make an envelope for rent/mortgage if it suits you.

Proverbs 27:23Know well the face of your flocks; and pay attention to your herds.

Davey Ramsey suggests this percentage of income for households that make at least $3,000 a month: 10% to a charity, 10% to savings, 25% for housing, 5% for utilities, 10% for transportation, and 7% for medical expenses.  This will leave 33%.  Because this breakdown does not cover our monthly expenses (the ones that I can't control as much - - like rent and utilities), I have settled on this breakdown of our spending: 10% to a charity (tithe), 47% to housing, 2% to utilities (we are very blessed to be on a town electric company), 16% to transportation, and 25% to groceries.  This leaves no money left over, meaning that we have to stick to our envelope system.

We don't have any money in the budget right now for medical expenses (outside of insurance, which is taken out of each paycheck automatically), date nights, babysitters, or spending money.

1 Corinthians 16:2On the first day of every week each one of you is to put aside and save, as he may prosper, so that no collections be made when I come.

If you can, save save save!!!  The general rule of thumb is to first tithe 10% and second save 10% as soon as you get a paycheck.  I so wish that we followed this rule and saved money each month.  It's something that we're working on.  Unfortunately, I can't figure out a way for us to save.  We have the lowest rent we can possibly find (we live in a one-bedroom apartment with our little one), lowest electric possible, and we use the car as little as possible.  Our student loans are in deferment for economic hardship (if you have student loans and aren't making enough money, call and ask about an economic hardship deferment to get you through until you're making more money).

So, here are the quick and easy steps to utilizing the envelope system:

1. When you receive each paycheck, take out the cash.
2. Split up your money into labeled envelopes.
3. Use the cash in each envelope for its specified disbursement.
4. When you run out of money in an envelope, you have no more money for that expenditure.

Happy enveloping!!