Monday, January 11, 2010

Day 11 - of 30 to a Simplier Life

This post is definitely not one of my favorite, in fact I would rather not do it. I would rather talk more about simplifying relationships and home clutter and things that are easier for me. But and this is a Big But - we do need to also simplify in this area, as much as it hurts and as much as we hate it!

Yes, I'm talking about money. It is the biggest area of complication in most of our lives. Well I am not a financial expert, but my hubby is very good with finances - so I asked him what would simplify a persons life the most in the financial area if they have not been practicing simplicity with their money and need to. So he said to me, "Tell them about the "Envelope System". I actually do know what the envelope system is because hubby has told me often I need to use it for my spending money. Hmmmmm, maybe it will try it...

Anyway, he is a great fan of Dave Ramsey - so that is where I am getting the information for today post... if you are interested in more financial help this is a great site.

So Here is the "Envelope System":

Get on a Simple System

I found out that Grandma's way to handle money still works. People used to always use cash envelopes to control their monthly spending, but very few do in today's card swiping culture. The envelope system is a key component of the Total Money Makeover plan because it works. Here are a few simple basics for starting a cash envelope system:

  • Budget each paycheck. Budget is a dirty word to most people, but you must budget down to the last dime if you're going to successfully implement the envelope system.
  • Divide and conquer. Of course, there will be budget items that you cannot include in your envelope system, like bills paid by check or automatic withdraw. However, you can create categories like food, gas, clothing and entertainment.
  • Fill 'er Up. After you've categorized your cash expenses, fill each envelope with the money allotted for it in your budget. For example, if you allow $100 for clothing, put $100 in cash in your clothing envelope for the month.
  • When it's gone, it's gone. Once you've spent all the money in a given envelope, you're done spending for that category. If you go on a shopping spree and spend the $100 in your clothing envelope, you can't spend any more on clothes until you budget for that category again. That means no visits to the ATM to withdraw more money!
  • Don't be tempted. While debit cards can't get you directly into debt, if used carelessly, they can cause you to over-spend. There's something psychological about spending cash that hurts more than swiping a piece of plastic. If spending cash whenever possible can become a habit, you'll be less likely to over-spend or buy on impulse.
  • Give it time. It will take a few months to perfect your envelope system. Don't give up after a month or two if it's not clicking. You'll get the hang of it and see how beneficial the envelope system is as you dump debt, build wealth, and achieve financial peace! See ... simple!
Certainly, some bills may come in at different times of the month, so you'll need to adjust your written game plan to take it one step further. You need to plan the budget based upon your pay periods.

Say that you get paid twice a month. If you can write down which bills you plan on paying from each paycheck, you will not be left with a surprise bill. Spend each month's income and each individual paycheck on paper before it comes in.

Have Some Fun

I also have no problem with you adding an envelope with money just to have fun with! As long as you and your spouse have agreed on it, you are fine. There should be no lying. Agree on your budget, agree on your fun money, and be open. Fun money can be anything you want it to be. There are no rules on that envelope, unlike money in the "entertainment" envelope that is used specifically for entertainment.

Luke 14:28-30

For which of you, intending to build a tower, does not sit down first and count the cost, whether he may have enough to finish it; lest perhaps, after he has laid the foundation and is not able to finish, all those seeing begin to mock him, saying, This man began to build and was not able to finish.


Anonymous said...

Great reminder. Thanks. Carolyn

Beverly Walters Whaley said...

Coach Kathy, What a great post you made today! For people like me who are NOT GOOD SAVERS and great spenders...this idea might really work for me! I get paid tomorrow. I get paid once a month! I do, find it sooooo easy and convenient to "SWIPE" but seems I just fly right through my money in a week...and stay broke the other three! LOL So, I will give it whirl your's and beavers idea...and will report in a month or its working for me! Love ya! Great for a simplier life!

betty said...

I like this blog,Kathy! It's simple enouph for me to understand and do. :)

CoachK said...

Thanks Carolyn for stopping by! I needed this reminder too!

CoachK said...

Hey Bev, I am right there with you...I am going to try this for a month too. Sometimes those Beavers have some pretty good ideas!

CoachK said...

Bettsy, I think that is why I am even considering it because it is simple enough for me too. I'm not good with the whole finance thing and I am going to give it a try this month.