I've heard Dave Ramsey and others talk about the "envelope system" of budgeting for years. I think my grandmother also used this method. The idea is that you make an envelope for each of your variable expenses and put the money you're budgeting for that expense in its envelope each month. When the envelope's empty, you can't spend in that catergory until the next month when you refill it.
Over the past eight years that I've been trying to simultaneously get out of debt, run my own business and renovate my big old VIctorian house (what was I thinking??), I've tried a variety of different things (with a variety of results) in the get out of debt department. One of the things that has worked really well for me has been to take out a weekly allowance from the bank each Friday and spend only that on my variable expenses (this is apart from utilities, mortgage, car insurance, -- things I consider bills). But sometimes, I'll admit, I've had an impulse purchase and gone over my allowance and then taken money out of my bank account for more necessary items. It seems like no big deal at the time, $25 here, $15 there, but it adds up and I sometimes find myself scrambling for money a few months later.
So this week, I'm going to institute an envelope system for my weekly allowance and see if this helps me stay on track. I'm going to have one envelope for automotive, one for cats and one for the dog. The rest of my allowance will be for groceries, housewares, clothes, and entertainment. I've calculated my normal costs for the car and pets and will put a few extra dollars into their envelopes each week so that when an unplanned expense arises (trip to the vet, tire blow out), I'll hope to have some money in the respective envelopes earmarked for those items.
Do any of you in the DS community use an envelope system? What do you like about it? What problems do you face with it?
