Using the Cash Envelope System

Posted on September 6th, 2012 by Discount Debbie

By now, I think everyone knows who Dave Ramsey is. He’s helped millions of people get out of debt. One of his huge strategies is the cash envelope system. It’s super easy and you can do it all yourself. Paying cash for items is truly the best way to stay out of debt. According to Dave Ramsey, if you can’t pay cash, you don’t need to buy it. I think that’s great advice from a wise man.

How to use the cash envelope system. 

1. Make a budget. If you don’t set a budget for everything such as food, clothes, gas etc, you won’t know how much to put in the envelopes. Dave Ramsey actually has a great free budget tool you can download HERE.

2. Label your envelopes. I highly suggest the smaller size envelopes because these are supposed to fit into a purse or something of that nature. Our labels are groceries, entertainment, eating out, emergency, gas, and misc. We do emergency for backups for things like food and gas and then put a little in the misc. just in case there was something we needed that wasn’t applicable to our labels. If you don’t want to use envelopes per se, I highly suggest the small accordion dividers that you can label.

3. Spend accordingly. With the cash system, once the cash is gone, you stop spending. You don’t steal from Peter to pay Paul. It takes a lot of self control, but when you can see what you are spending, you are less likely to spend it.

4. Free your credit cards. No literally freeze them! That’s what Dave Ramsey says to do. To keep you from being tempted, he says to put them in a bowl of water and freeze it. If you are willing to let it melt, it may be reason enough to use it.

5. Re-do it every paycheck! Sit down with every pay check and do it all over. Have money leftover? That’s ok. You can either put it into savings, or put it into the envelope for extra that week.

Do you use the cash envelope system? Has it helped you? 

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