The Dave Ramsey envelope system is a great way to budget your money.

One of the most popular ways of budgeting your personal finances is by using Dave Ramsey’s system, which he promotes on his daily talk radio show.

It’s a truly simple but ingenious plan that hearkens back to the old days, when everything was done in cash.

Nowadays, much of our spending is with checks, debit or credit cards, but the Dave Ramsey envelope system can still work for you, IF you truly want to get out of debt.

It’s as simple as this: At the beginning of each month, figure out where your income must be spent. This is the “budgeting” part, and it’s where you must be brutally honest with yourself.

You know how much money you’ll be earning during the month; now is the time to determine where, exactly, every penny of that money will go.

Once you have it down on paper, the Dave Ramsey envelope system kicks in. You simply take the allotted amount of money - in cash - and put it into separate envelopes.

One envelope for “gasoline,” one for “groceries,” one for “utilities,” etc. Now, many of your bills are paid online or by check, so you might not be able to use cash for those. But if it’s at all possible, use cash. It really works best for this system, because spending cash feels psychologically different from swiping a debit card or submitting your payment online.

You can drop a hundred bucks on groceries easily when it’s all done with plastic. But when you actually have to plunk down five $20 bills on the counter, you FEEL it! And it HURTS! And it makes you more aware of what you are doing; you’ll quickly find yourself vowing to spend less.

Now, this is the important part of the Dave Ramsey envelope system: Once you’ve spent all the money in a particular envelope, THAT’S IT. No borrowing from other envelopes. No going to the ATM to get more cash.

You also must resist the urge to use your debit card to buy things that aren’t on the budget. Debit cards are such a blessing, but if used irresponsibly they can also be a curse.

They’re a blessing because they’re so convenient, and they’re a curse because they’re ... so convenient. They make it TOO easy to spend money. You must resist that temptation!

The envelope system helps you get used to the tangible, literal feeling of handing your hard-earned money to a cashier and watching it disappear. Hopefully, this feeling will sink in and you’ll want to spend less next time.

Give yourself some time to get used to it. You’re bound to make mistakes at first, and you might find some temptations are too great to withstand. But over the course of a few months, you’ll get used to the system, and you’ll find you’re spending less and less.

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