One of my goals for 2011 is to start using the envelope system for my money. If you've read any books or listened to Dave Ramsey, you know exactly what I'm talking about. It turns out that swiping my debit card (even though it's a DEBIT CARD) is just too easy.
Here are a some tips for using the envelope system:
1) You have to budget each paycheck. Budget every single penny.
2) Divide and Conquer. Not all categories will require an envelope. For example, I'm not using the envelope system for my water bill. I don't plan on overspending in that area...unless I get a pool (which is a great idea by the way).
3) Fill 'er up. After you've budgeted every penny, it's time to fill those envelopes. Make sure to put the total budget amount and the category name on each envelope.
4) When it's gone, it's gone. Once you've spent all the money in an envelope, stop spending in that category. I know it stinks, but that's reality.
5) Don't be tempted. When you spend cash, there's something that happens when you see no more money in the envelope. You stop spending. When you use a credit or debit card, you're more likely to spend more. So, even though those $50 shoes that Suzy just bought would look ten times better on you, just walk away if there's no money in the shoe spending category . Let Suzy have her shoe glory. One day when you're debt free, you can buy all the shoes you're little heart desires.
6) Give it time. Yes, this means you have to be patient. It will take time for everything to work smoothly. Don't give up!
I wish I could say I came up with this awesome list myself, but I didn't. Check out Dave's envelope system list here (and check out his website while you're at it).