Most of us struggle to keep money in our wallet, unspent, until our next payday.
The “envelope method,” promoted by Dave Ramsay, might be the spending strategy that helps you control your spending! So how does it work?
The first step is actually having a budget! Track ALL of your spending for a month. ALL of it!
The biggest, most common categories are: rent, groceries, restaurants, transportation, health, beauty, entertainment, and home needs. Compare ALL of this spending to your paycheck.
Except bills like rent that you have to pay online or by check, pick a spending limit for each category. Each one should have a maximum dollar amount you’ll spend!
Then take your total budget out of your paycheck in CASH, and make sure the rest is in savings. Put those debit and credit cards away; it’s too easy to spend with them! But when you see how much cash you have on hand, you’ll think twice about that impulse purchase.
Then here’s the key. Take the limit you can spend in each category, and put that much cash in an envelope.
You can ONLY spend what’s in the envelope ALL month for each category. When it’s done, you’re DONE!
This method FORCES you to make tough decisions. No more cash in the entertainment envelope? Can’t buy that video game. No more beauty cash? Gotta do your nails at home!
The envelope method can feel extreme - but when money is tight, extreme circumstances require extreme solutions!