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The Envelope System: How I started budgeting

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Four years ago I found myself drowning in a sea of debt. At the age of 22, I was fairly new to the idea of budgeting money.

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Four years ago I found myself drowning in a sea of debt. At the age of 22, I was fairly new to the idea of budgeting money. I had no financial responsibilities as I lived rent-free, paid $10 per month for my cell phone and had no vehicle. My only responsibilities were transportation and paying for my groceries. I was, as some would say, “living the life.” Well all of that changed when I found out I would be expecting a child. With that in mind I realized that while I had secure income from my job, I didn’t have a nest egg or the financial means to care for a child the way it needed to be cared for.

I knew that something had to give as I was in debt and wanted to minimize it before my due date. I tried creating a budget using Excel but kept forgetting to refer to it on a routine basis. Utilizing credit and debit cards meant that I was swiping without tracking – a bad combination. There had to be another way to budget and save that was easier than remembering to check a spreadsheet each week, so I did a bit of research.

The Envelope System

After a bit of research and reviewing I stumbled across the envelope system. It was a system that was used before the world became so technical and “plastic.” The process seemed very simple to follow and would allow me to create a budget and track my spending at the same time. So I got to work utilizing these few steps:

• Create a Budget — I sat down and created a budget based on my needs. Categories included: transportation, cell phone bill, food, baby expenses, savings and debt.
• Budget checks — Next I needed to calculate incoming cash and allot a spending limit for each category. I allotted $10 for my cell phone bill, and I purchased a bus card for $50 each month, for groceries I allotted myself a budget of $100 per pay period (twice a week in my case) as well as baby expenses.
• Treat Yourself — I knew I would drive myself crazy if I didn’t allot for some fun, so I gave myself a budget of $75 per pay period to just splurge on myself.
• Debts/Savings — After subtracting the allotted expenses above, my paycheck left me with about $200. I decided that I would put 60 percent toward outstanding debts and 40 percent toward savings.


Once I divvied everything up, I placed them in envelopes. Once an envelope was empty, that meant I had spent all I could for that particular category. I maintained this practice for the better part of my pregnancy and by the time my little one was born I had paid off most debts in collection and saved a total of $1,000 for an emergency cushion.

Some might call it old fashioned or time consuming, but in my opinion, the envelope system saved me from being in debt when my child arrived. I continue to use this system and have been able to pay off all my debts and save three months worth of income over the course of three years.

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