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What is Dave Ramsey’s Envelope System?
If you are looking to learn about Dave Ramsey’s envelope system, and want a free printable to help you with the process, you are in the right place!
This envelope system is not a new concept, but it has been a proven method for many years to help people gain a better control over their saving and spending habits.
Dave Ramsey’s envelope system is a budgeting method that thousands of people have successfully used to save money and achieve financial goals. It includes putting cash into envelopes and using this cash for spending money, instead of using a debit or credit card. Envelopes are categorized by budget categories.
Be sure to scroll to the bottom of this article to find a free printable for Dave Ramsey’s envelope system!
Will the Envelope System Help Me?
One of the key reasons Dave Ramsey’s envelope system is so successful is because it helps to modify your behavior around spending! What this means is you are likely to spend less because you experience the loss of physical cash compared to just seeing numbers decrease on your bank account.
This is a highly effective way for people to achieve financial goals, like paying off all of your debts, and for also helping you spend less overall.
Dave Ramsey’s envelope system is one that I have used for many years and I highly recommend it to anyone who wants to begin budgeting and really take control of your financial future!
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What is Cash Flow Planning?
The concept of cash flow planning is the foundation of Dave Ramsey’s cash envelope method.
This essentially means that you will have a grasp over what money comes in and goes out every month. Essentially, how much you save and how much you spend.
The point of having a budget in general is to finely tune what you do with your money! Therefore, the cash envelope system is a way to plan where your money goes.
How to do Dave Ramsey’s Envelope System Method
In order to do Dave Ramsey’s envelope system, all you really need is a handful of envelopes and cash!
Below I will go through the different categories that you will allocate your envelopes into.
I also have included a printable for Dave Ramsey’s envelope system at the bottom of this article so you can easily track your cash flow and plan your budget each month! Be sure to take advantage of this free printable for the envelope system!
To do the envelope system what you need to do is set up your monthly budget. This can be done through a free app like Personal Capital.
Having a budget essentially means that you are allocating every dollar that you are earning into a category. your money will be put toward housing, food, utilities, entertainment, giving, debt payoff, and many other spending and saving categories.
The point of the envelope system is to pay for these things through cash, in comparison to paying through a card or check.
In order to get the physical cash that you need to put into your envelopes, I recommend you simply request cash when you deposit your paycheck.
RELATED ARTICLE: How to Do a Financial Reset to Get Back on Your Financial Journey
Envelope System Categories
Choosing your envelope system categories is based off your own personal budget. After you have created your budget through a free app or through a printable, you will label your envelopes based off of these categories.
Below is a list of the envelope system budget categories that I personally use:
- Food and groceries
- Gifts
- Clothing
- Mortgage
- Debt payoff
- Utilities
- Gas and transportation
- Tithing and giving
- Personal spending
- Medicine/pharmacy
- Entertainment
- Insurance
It is important to note that I now regularly use sinking funds to more effectively save and spend. Be sure to check out how to use sinking funds in your personal budget in this detailed article here!
6 Success Tips for the Envelope System
1. Don’t take cash from other envelopes
When beginning the envelope system it can be very difficult to estimate how much money you will need for each budgeting category. Unfortunately, over the first three months you may find that you need more money in one category compared to another. This is usually most common when it comes to entertainment and food.
One of the biggest tips I can give is to not take cash from other envelopes! This can be something you can do down the road if you have a good understanding of your budget, but when starting out it can be very tempting to take money from other envelopes. The goal here is to really know how much money you are spending per category and to be able to limit yourself when needed.
Building up your spending habits is key to having a successful budget!
2. Reward yourself!
An important factor to the cash envelope system is to reward yourself! It is important to realize that skimping on spending in every category of your spending can get tiresome and frustrating. If you do a great job in the month and spend less than you allocated, be sure to reward yourself every once in a while, by going on a date night, taking your kids out for local entertainment, or even buying yourself an expensive drink.
Too many people burnout when starting out on a budget, and you definitely want to get over the three month hump, as many money gurus talk about. By going cold-turkey and not rewarding yourself for your hard work, you are likely to have a difficult time with your envelope system budget.
Be sure to reward yourself when you can!
3. It takes time
As mentioned above, it takes time to get your budget right. In fact, when it comes to starting out anything new, it can take three to six months to be confident in what you are doing. Plus, starting a brand new habit takes time and significant effort at first to change your daily routines and your mindset to achieve your goals.
I am currently years into successfully using a budget. But, I can absolutely confirm that the first few months are difficult to expertly estimate how much money you are going to spend per category, and it feels difficult at first knowing that you are limiting your spending compared to the lifestyle you lived before.
It is important to realize that you are not alone! Just know that it will absolutely get better and know that it does take time to get your budget to the way that it needs to be!
4. Include the entire family
If you have children, it is highly recommended that you include them in the Dave Ramsey’s envelope system. This can be as simple as explaining to them the difference between using cash and a card, and then seeing how you use it at restaurants, at the grocery store, and when spending money in general.
Below I have explained how to use the envelope system specifically for children, if you are interested in having them allocate their own money into envelopes!
I believe it is imperative to set a good financial example for your children, to ensure that they will learn how to spend, save, and use money for growing wealth as they age
5. Have budgeting meetings
Budgeting meetings have been a great way to keep my spouse and I on track every month! Even though I have been sticking to a budget for years now, my husband and I have monthly budgeting meetings to ensure that we are on track, to plan for the month ahead, and so we can achieve our financial goals in the timeline that we want.
If you belong to my email newsletter you have received my exclusive Couples Budgeting workbook that thoroughly goes through how to have a monthly budgeting meeting and associated worksheets to get you through the process!
If you are not a part of my newsletter (scroll down to sign up!), there are many resources out there that can explain how to go through a budgeting meeting and how this can positively impact your cash envelope budgeting method to get you on track with your spouse toward achieving your big financial goals!
6. Have an accountability partner
Lastly, having an accountability partner is something I preach about throughout my articles, courses, and workbooks. Reason being, an accountability partner is someone who will keep you on track.
When you start a new habit of any kind, odds are not in your favor. As in, you are likely to quit within the first three months! We all have experienced New Year’s resolutions that last only two weeks or up to one month.
An accountability partner can be a close friend, relative, or even your spouse! This person is someone who you can check in with on a regular basis (once a month is sufficient) and this person is someone who can motivate you and help you through the process. If you do not already have an accountability partner, I highly recommend you find someone who can check in with you as you began Dave Ramsey’s envelope system!
Dave Ramsey’s Envelope System for Kids
Children can also benefit from Dave Ramsey’s envelope system. Instead of having multiple categories, all you really need is to separate your envelopes into three specific categories: giving, saving, and spending.
Children of any age can participate in this system, and it will make a huge difference in their worldview regarding how money works.
To begin, separate these three envelopes. Encourage your child to put money from birthdays and Christmas into these envelopes. It is important to educate them the importance of delayed gratification, which essentially means to wait to get your reward.
Instead of simply putting money into a piggy bank, this envelope system is a great way to educate your child on the importance of giving, and how to save up for what you want!
By having your own envelope system in place, your children can see how you and your spouse use the envelope system, and this will encourage your child to participate in their own envelope method!
Dave Ramsey Envelope System Printable
Below you will find a detailed printable that will help guide you to having a successful envelope system!
This printable for the Dave Ramsey envelope system has been a tried and true addition to my regular budget meetings, and I believe it will be an asset for you and your spouse (or accountability partner) as well!
Click the photo below to be taken straight to the printable and do not forget that if you sign up for my email list you get a freebie or printable with every single email! Thousands of women are taking advantage of this awesome newsletter, and I would love for you to join the fun too! (Scroll to bottom of the page to sign up!)
Summary
Dave Ramsey’s envelope system is a method of budgeting that has been used for many years! Women, men, and children can all benefit from this method to help you save money every month and guide you toward achieving your financial goals.
Using this method has been helpful in my life to help me pay off $70,000 from graduate school and I truly believe it can be a great addition to your current budget. Just remember that this envelope system can take a few months to get the hang of. You won’t have a perfect budget the first time around!
As I always say in my articles and social media, consistency is key!