Over the past two years, we have tried a couple different budgeting and money saving systems such as extreme couponing (who has the time for this?!) and using a spreadsheet to manage our checking account. Both of which, just didn't prevented us from overspending. It was astounding how easy it was to overspend, even when we thought we had a budget under control. Debt was growing...
Upon talking with several friends who have taken the Dave Ramsey "Financial Peace University" through their churches, I became curious. I began to research his teachings and found that he is all about dividing your income into categories, then carrying cash in envelopes pertaining to each category, among many other great ideas which I will share in a bit. But as I researched his program, both Trevor and myself just couldn't grasp the cash and carry method because:
- Who carries cash anymore?
- We do online shopping, so if all of our money is in cash, what do we do?
- We both grocery shop and run errands, so how do we coordinate who carries the envelopes at which time?
- What happens if we lose an envelope filled with cash?
- We have USAA for our banking and we do all of our banking online.
- Snowballing your debt payments. (http://www.daveramsey.com/article/get-out-of-debt-with-the-debt-snowball-plan/)
- Having an emergency fund of at least $1000 for life's unexpected (http://www.daveramsey.com/company/faq/#emergency_fund)
- Create categories in which you spend your money (http://christianpf.com/how-to-use-dave-ramseys-envelope-system-to-budget/)
- Only spend what you have!
For the remainder of this post, I'm only going to discuss the debit cards and categories we use- the debt and emergency fund can be looked up online.
Since we have free unlimited checking accounts, we decided to try the "envelope" system via debit cards. Believe it or not, we have 15 checking accounts and 1 savings account. Don't worry, we actually only carry cards for 9 of them since they are the categories in which we mostly spend. The other categories are checking "savings" accounts that we transfer money into, but aren't frequently used. Here are the categories we created:
- Paycheck Account (This is where our paychecks get deposited)
- Home (Target/Walmart/Household)
- Date Night
- Kristen's Allowance
- Trevor's Allowance
- Gifts (Birthdays, Christmas, Anniversary)
- Pet (vet, food, treats, toys)
- Vacation (Only used when we're on vacation)
- Emergency Fund (EMERGENCIES ONLY!)
- Auto Registration (it happens every year, so why not save a little each month?)
- Future Home (Savings account)
The red categories are the accounts that we carry a labeled debit card for; the black accounts are categories that we either don't spend out of or we do primarily online banking with them.
- Our paychecks are deposited into one checking account labeled "Paycheck Account." This is where our budget stems from.
- Since Trevor's income varies with each paycheck, we budget with what minimum amount his paychecks always are. Any monies left over in that pay period go toward debt or into the house savings account.
- I use the sample spreadsheet below to transfer funds into the corresponding accounts each payday. As the funds are transferred from the Paycheck Account into the corresponding category account, I highlight the cell on the spreadsheet to know that it has been accounted for.
- Once all funds are transferred out of the Paycheck Account into the categories, we then use our debit cards for purchases and/or online banking to pay bills and other items.
Since doing this process, we have found that BIG areas of overspending for us were in grocery shopping and date nights. By going on a date one to two times a week or buying unnecessary items at the grocery store added up fast!
Here are the benefits we have already seen from this system:
- This process has been a fairly smooth transition and we have found areas in which we need to increase our budget and decrease our budget.
- Our money is transparent to both of us. We both know what goes where and how to spend it.
- We haven't gone without. We still have our own "fun money" for our WANTS and have confidence that we will have enough money for our NEEDS too.
- We aren't using credit cards
- Our debt is decreasing
- We are still SAVING money too!
I'm not saying that our system is 100% effective or what's best for you and your situation, however, it has helped Trevor and I manage our money, which in turn, has alleviated lot of stress between us. So far, we love it and I hope you will too!
I'd be more than happy to share my spreadsheet template with you! Just leave a comment with your email address and I'll send it over.