Envelope System

So, you know by now that I am not a credit card fan, but how do you actually use cash?

OK - so, written out from my side of the issue, this is a funny question, but I wouldn't have been laughing a few years ago and I hear some people who really do wonder...

We have been propagandized to death with the penguin march of the plastics and it has become a huge method of transaction today. So much so that many of you might be balking at the idea of walking around "with all that cash!" I mean, what about muggers!

Believe me, we've been through this discussion a few times. In fact, I didn't bounce right back to cash myself without a little cajoling from Dave. Some of the arguments can be found in another post about Plastectomies (which should post 2/8/09).

Basically, you will spend more with plastic, whether credit or debit - to the tune of 12%-18%. Averages being what they are, I suspect that you might do well one time and much more poorly the next; or, like me, go ahead and buy that ginormous wall tent at Econo-Mart because its good to go camping with the family. (Even Gary Smalley says so.)

Just the same, Doritto breath, plastic is a budget buster. And a mugger can get a lot more than cash from the average credit card information these days.

So let's assume that you see the value of cash over cards, but what about the details?

These days, as long as you have the little Visa (or other) sign down in the corner of your debit card, it should carry a lot of the same benefits as your credit card, but without the debt. You should ask your bank if you aren't sure - just don't let them talk you into a credit card anyway. Most car rentals and hotels will take a debit card. And most of them also take cash.

So, assuming that you have now set up your budget, the envelope system is simply the real part of your paper plan. So, as if you had drawn up the plans for the house on paper, then built it, so now you have drawn up the plans of the budget on paper and built it in your envelopes.

And we do mean envelopes. You can go buy them on the Dave Ramsey site too - and I do recommend the Deluxe Envelope system in particular. But you can just use any envelopes to label and insert cash. If you are going to the grocery store, then take the FOOD envelope. If you forget the FOOD envelope, then you should go back home and get the FOOD envelope.

I recommend that you get the system because of this, because then you have it all with you and it is well organized too. Crystal actually started carrying around Dave Ramsey cards to give to people because so many people asked about it and thought it was so neat.

If the money runs out in that envelope, for that category, then you stop buying. If it is something that you NEED, then go home to your Honey and re-arrange the budget and then the cash in the envelopes. You both have to be in agreement. There at least needs to be a phone call to get the approval on a revision.

We do not include utilities, phone, mortgage or other mailed bill items in the envelopes. For those we still write checks, which cost money, GGRRRR. Online is a good way to get around this, and Dave recommends the Auto Billpay stuff. But I am not quite there yet. I like to be able to watch all that and send them when we know we are ready.

We have a seperate account for gas and Internet purchases. Crystal, with three kids in the van does have a certain point there...

Also, as you work the budgeting out, expect it to take about 90 days before you actually get it to work. We had ours pretty well going in 60 days, but we already had over a year's expenses recorded, so we knew the trends already.

I hope this is helpful. Feel free to call or email any questions...