We are heading into the 20th week of our 2012 Debt Free Challenge! I am a big believer in using cash and an envelope system to keep track of our spending. While I shop, I talk to a lot of people who say ‘I’ve tried but it didn’t work for me.” My question for these people, is how did you try? What did you do? Did you keep track of all of it? I thought it might be good to go back through envelopes and why they play such an important role in working yourself out of debt.
You work hard on setting up your budget, because you want to use every extra penny you can find to pay down your debt, right? That means you have a set amount established for your groceries, clothing, fuel, etc. Using cash helps you keep the reigns in tighter on your spending.
If you shop and use your debit card, you may think that a few extra dollars here and there doesn’t matter, but if you exceed your budget by even just $15 each week, that is $60 a month that you just overspent. That is also $60 you didn’t send in to pay down your debts. When you use cash – that doesn’t happen. The reason is you can not overspend because you physically do not have the money to do so.
I know it can seem tedious to write down what you spend. I’ll admit that there are times I forget to write things down on my envelope. But I’ve been doing it long enough that I know what I’ve done and can get back on track quickly. I’ve been using this system for nearly 4 years now.
One thing I hear many people say is that they spend more with cash and that this method didn’t work for them. My question is this — did you keep track of what you were spending? Did you use the envelope method correctly? If you just stick $500 in your wallet and use it for anything you buy, you really will quickly run out of cash and spend more. The reason is lack of accountability.
When you use envelopes, you are accountable to that envelope. If groceries reads $300 for the next two weeks, you have to be accountable to that envelope to ensure that you do not overspend. Again, it just takes time for you to learn how to do this.
I am not telling anyone that you have to do anything. I am sharing this system – because it works. I use my debit card only for fuel. It is budgeted and we feel confident using our debt card because we know that we will never overspend on that item. That really is it. That is all I use it for. I use cash for everything. I even shared previously why I don’t have a Target Red Debit card. It is not cash. There is not the discipline to not spend when you use plastic as there is with cash…..at least for me.
If you really want to work hard to get out of debt, you will want to give the system a shot. If you try if 6 or 7 months and you can’t get it to work for you, then so be it. Perhaps you need to try another option. Rather than get cash, pick up a Visa Debit Card. Transfer the amount you have to spend on all of your “envelopes” for your pay period and transfer that onto the card. That way, you only have the amount on that card to spend and when it is gone – it is gone. The point is to just control your spending – in whatever way you can find works for you.
Remember that this entire challenge is a process. You didn’t go into debt overnight, so you can’t expect to change your spending habits and the way you look at money to change overnight. You can’t even expect it to be fixed in one, two or even three months. You have to give yourself a chance to re-teach yourself how to handle your finances.
| **Please, if you have recently paid off another debt, share with us! You can report every single debt — so that we can have an accurate amount reflected!! As a reminder, the survey is completely anonymous – there is truly no way for me to know who you are at all. You can share your amount you have PAID OFF HERE. |
(I am not a financial advisor and the information listed within these Debt Challenge posts is not to be construed a financial advice. This is knowledge we gained through our own personal experiences and information as outlined in Dave Ramsey’s Financial Makeover — and is being shared as such. Participants are not required to follow any steps listed if they do not wish to do so. Financial concerns/issues should be addressed with a professional in order to receive advice and assistance.)
New to the site? Catch up on all of our previous lessons and join us for the 2012 Debt Free Challenge!!
Tracie is a stay at home mom to three young children; ages 4, 6 and 8 in Raymore, Missouri. In November 2007, she and her husband decided to eliminate their debt and made many changes in their lifestyle to do just that.
In 27 months, they eradicated over $37,000 in debt through both budgeting and learning how to live a frugal life. She now shares her knowledge in order to help you stretch your hard-earned dollars so you can live the life you want.