Yesterday your challenge was to create a budget! Utilizing a budget is the first step towards financial freedom. If you can STICK WITH your monthly budget, you will start to see your rewards of diligent planning turn into a beautiful debt free life.
Today I am going to sharehow to create an Envelope System!
I am not going to go into detail on Dave Ramsey’s 7 “Baby Steps” in my challenge this week (you can find that through his website), but I will “introduce” you to Dave’s plan. But first I want to share my story and how I got to where I am now.
My story:
Like Dave Ramsey, I did not grow up in a wealthy family. My parents worked HARD in a blue color society and lived paycheck to paycheck. Even when they did have some extra money, they had a “poor” mentality and spent every last cent, as fast as they could. There was no such thing as a savings account in my home. They did not have the tools to succeed with their finances (Like me, they were never taught). I always ponder “what if” they would have known about Dave Ramsey’s plan. What if they realized they didn’t have to live paycheck to paycheck, scrapping just to get by every month. It’s a conscious choice to live with or without debt. Simply put, in order to change your family tree, you must learn how to use the tools (Thats where Dave Ramsey comes in the picture). I obviously wasn’t taught those tools and made my own mistakes along the way. My husband and I married young (we were 19 years old). We were not used to seeing so much money come in (a lot to us anyways). We were so excited on the 1st and 15th of each month (military paydays) that when we got a paycheck, we always went out and “shopped” each paycheck away. By the second week of payday, there was nothing left and we got accustomed to living on nothing for a week before the next paycheck came. I had a lot of nice clothes in my closet, let me tell ya! The sad thing was that after I bought the clothes, we didn’t have the money to go anywhere to be able to wear them to. The joke was on me. When the paycheck dwindled down, we didn’t stop there. Soon, credit cards became our new best friend. We were young, ignorant and we needed everything NOW! We became slaves to consumer debt. We didn’t have a budget. We didn’t have a plan. We lived paycheck to paycheck, following the teachings (or lack there of) of our family tree. That is UNTIL a couple of years ago… I was blog surfing one day and read about a man named Dave Ramsey. I watched {this video}… a video that changed my life! {Here} is part 2 of the preview.
After researching more about Dave Ramsey’s program in November of 2009, my husband and I finally decided that we were going to change our financial future. We decided that we would no longer be chained to our debt! We make way too much money (a 6 figure income) to be giving it away each payday (to debt collectors). We are not debt free yet. We have only been on the Dave Ramsey plan for about 17 months. We are currently on “Baby Step two”. We have paid off thousands of dollars in consumer debt, car payments, student loans, mortgage payments, etc… We are 75% paid off and 25% more until we can call Dave Ramsey and scream WE’RE DEBT FREE. I’m here to tell you, we have learned from our mistakes. We are not perfect and splurge every now and then (a new laptop – wink), but we do NOT use or have credit cards anymore. We are a cash only family. We are diligently teaching our children about financial freedom. Everyone in my house knows who Dave Ramsey is! Second to our Heavenly Father, Dave is the most popular guy in our house. 😉 He has changed our family tree and I am forever grateful.
My husband and I stress to our children that you do not need credit cards to enjoy the finer things in life. You should save up your own moneyif you want to splurge on something new. Don’t borrow it, only to have to take years to pay it back, along with the nasty interest thats added to it. The credit card companies are getting richer and the consumers are getting poorer. Remember the times when having a credit card meant you were rich? Or so we all thought. How wrong were we! I tell my children that if you save NOW (even babysitting money), by the time you graduate from college, you may be able to pay cash for your first starter home. How awesome would that be? It may not be a big home, but it will their home free and clear. Only time will tell, but my prayers are that my kids will use the tools we have been teaching them and they will never have to work a day in their lives, just to give their hard earned money to someone else. I hope you get something out of my story. You may even relate? My goal is to inspire you and open your eyes up to “options”. There are other choices, besides stressing over debt. You can become debt free. You just have to take “Baby Steps”.
Dave Ramsey’s 7 Baby Steps:
1. $1000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. 3-6 months of expenses in savings
4. Invest 15% of income into Roth IRAs & pre-tax retirement
5. College fund for children
6. Pay off home early
7. Build wealth and give!
In order to start the Baby Steps, you need to FIRST create a written budget (we already did that yesterday). If you would like to learn about Dave Ramsey’s plan, you can sign up for a Financial Peace University course at your local church or visit his website for more information. You can get started by reading Dave’s Total Money Makeover or Financial Peace Book.
There are also some other great people out there who are sharing how to become debt free.Dani Johnson is one of them. I’m reading her book, Spirit Driven Success, right now. I LOVE, LOVE, LOVE it & highly recommend it to everyone. Dani reveals biblical secrets to achieving financial freedom.
Dani was on the season premier of Secret Millionaire last week. {Here} is the FULL episode & her story. I promise, you WILL BE inspired. 🙂
Todays’ challenge: Create a cash envelope system!
Switching to cash instead of using your debit or credit card will help you control your spending. It did me! Try it for one payday and see how much money you will save. You will be amazed!
*I do not use cash to pay our bills. I pay everything via online banking. The envelope system is for our spending allowance.
{Here} is the envelope system explained step by step from Dave Ramsey.
WHAT TYPE OF ENVELOPE SYSTEM SHOULD YOU USE?
You can use any type of envelope system that fits your style & budget. An envelope is an envelope. As long as you are organized, whichever one you choose will work just fine. I have a few examples to share with you today.
Someone who is super creative in making plain envelopes look stylish & pretty is Jen from iheartorganizing.blogspot.com. She uses her envelopes for couponing. They are perfect for a cash envelope system.
Dave Ramsey also sells Envelope systems on his website {here}. I personally use the Deluxe system (shown below). (psst… its in the giveaway pack this week).
One very inspirational envelope system is bykelleighratzlaff.com. She shows step by step, how to create the system below. She also sells it {here}.
She even has free downloadable labels {here}
HOW MANY ENVELOPES DO YOU NEED?
It’s up to your specific situation. I have 5 envelopes. I fill mine 2 times a month (once each payday). My budget for the month tells me “how much” to put in each envelope. I try to use the absolute minimum $ each payday and pay off debt with the rest. For example… I allot only $125 per week for groceries. It may not seem like a lot, but after using coupons, I almost get twice as much food!
1. Food
2. Gas (its a pain to pay gas with cash, but you will get used to it)
3. Entertainment
4. Clothing
5. School expenses (lunches, fees, etc)
Like Dave says, once the money’s gone, ITS GONE!!!!! In time, you will learn to say no to un-necessary stuff, because you have no money left in your envelopes . (NO borrowing from another envelope or your savings account. It would defeat the purpose of using the envelope system in the first place). If used correctly, this system will help you to save money, pay off your bills, and become debt free!
If you would like to share pictures of your envelope system, you can link up your post on the first day {here}.
Good Luck creating your envelope system!
*There is a GREAT {online ehow article} with step by step instructions on how to use the envelope system. It may be different than the Dave Ramsey plan, but it will help you to understand the general logic of the “envelope system”.
