Dave Ramsey, Little White Envelopes and why it Took me 5 Years to Create a Budget

Dave Envelopes BudgetI’m a compulsive saver.  As early as five years old I can remember hoarding my allowance and in the event that I splurged on a new toy, I made sure I always had something left in reserve.

For that reason I always thought a budget seemed, well…beneath me.  Because I have a propensity to save, I never really thought I needed one.  Every payday I would make a mental note of the bills that needed to come out of that check and allow myself around $250 to cover me for gas, eating out and whatever other small expenses might arise.  The rest got dumped into savings.

Some months this method seemed to work well.  Others not so much and I would be digging money out of savings or worse yet, putting it on a credit card just to “float it” until the next pay period.

While I managed to stay out of debt (for the most part) and always managed to have something in savings, my gung hoe, save it now and dig it out later mentality lacked one key element.  Consistency.  Sure its great seeing those numbers go up in big increments but if you have to turn around the next month and take some of it back out, are you really better off than if you just committed to saving a smaller amount every month and allowed it to grow?  What’s more, I really had no idea where my money was going because I was just paying for things.  If an unexpected expense popped up, I just took more out of savings and paid it, reasoning I’d “replenish” my savings the next month.

Then something happened.  I got married. Actually my wife and I started a budget a few months before our wedding but as we looked down the pathway of becoming a two income household, we thought we had better get a grip on our finances.

The first wake up call came after I created a simple excel spreadsheet to outline our finances.  In one column I listed my net pay for that period and beneath it subtracted out all of the expenses I knew had to come out of that paycheck.  I think there was something like $200 left over.  $200 to get me through the next two weeks.  She was flabbergasted.  Then we moved on to hers.

Granted I had a few more expenses in my column than she did and she had just started a new job so her pay wasn’t quite reflective of a normal pay period, but the $165 left at the bottom of here column was proof enough that we needed to do something.

So we started the envelope system.  I had been reading The Total Money Make Over by Dave Ramsey already so I understood the philosophy.  If you’ve never heard of the envelope system before essentially you create a separate envelope for literally EVERY expense you will have throughout the month.  Rent, utilities, groceries, gas, clothes and even spending money.  You budget out every dollar of your income until all the envelopes are full and the outstanding balance equals zero.  The idea is you are able to tell exactly where every dollar of your income goes.

Let me tell you it was an eye opening experience!  I had no idea how much we were spending on groceries and eating out alone.  Bills are bills and those fixed expenses make the process easier but it’s in the areas that fluctuate that you’re in for the biggest surprise.

Putting together a budget and allotting ourselves a certain amount for each envelope not only gave us a gauge on where our money was going, but made us be a little more choosy about where and how we were spending our money.  For example we know we only have $150 to spend on meals out for the month so going out for steak during the first week probably isn’t the best idea.

Sometimes it’s difficult.  There are always those hidden expenses that pop up or those months that roll around and it seems like everyone in your family has a birthday or an anniversary.  What we’ve done to plan for those occasions is take any excess money in the envelopes at the end of the month and create a reserve envelope.  This is not part of our budget and is only to be used for hidden expenses that pop up beyond what we’ve budgeted for the month. (This is not the same as an emergency fund.)

While it’s not always convenient, being on a budget has allowed us to regain control of our finances and has even taught us to be more patient.  Rather than just buy what we want, when we want, if we don’t’ have enough money left in the envelopes then we put it on the list for the next month.  If we have trip coming up or some sort of large expense, we’ll create an extra saving envelope a few months in advance and redistribute our money so that we can plan for that expense.

Probably best of all, it allows us both to be on the same page financially.  We’ve chosen to blend our finances and while we do have decent discretionary income at this point in our life, we’re working to pay off some debt and save for a house and the envelope system sort of levels the playing field.  We came up with the plan together, we’re in agreement on how we want to spend our money and when the envelopes are empty, we’re done for the month.

How to create a budgetThe envelope system certainly isn’t the only method for budgeting but it’s a very popular one because it involves using cash.  It’s much easier to swipe a card than to physically hand over your hard earned $$$.

If you’re looking to take a step in that direction but are unsure where to start, I’ve created a simple budget outline that you can download.  Just enter your income and expenses and everything else will automatically calculate. Click HERE:


What is (or was) your biggest excuse for not starting a budget? 

One thought on “Dave Ramsey, Little White Envelopes and why it Took me 5 Years to Create a Budget

  1. tony

    I know this feeling all to well friend! I'm the same way as you, and like telling money where to go, but hate when there is nothing you can do when outgo = more than income. My wife went into maternity leave (unpaid) 4 weeks ago. We had a good savings on hand when it happened, but that week my brakes went out on my paid-for car and it got totaled. Now we have 2 car payments and gas now at $4.00 a gallon. The 3 combined (no 2nd income, more gas $$, and 2nd Payment) has put our income for a month into the red. Not sure what's going to happen, but trusting god to provide.


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