The Envelope System

Handling Household Expenses without Credit Cards

Want to reduce your credit card debt? Try the Envelope System.

Credit cards are easy to use, too easy! You swipe them, sign them, and forget them! Then you try to put those charges out of your mind until the credit card statement comes. When you open that bill and look at the interest, you realize you'll be paying that purchase off for years, if not for decades!

One of the oldest, most time-honored ways of reducing credit card debt is called the Envelope System or Envelope Method.

It's simply a hands-on system that keeps you accountable for what you spend. As the name implies, you assign an envelope to each item in your family's budget. On the outside of the envelope, put the budget item name, the amount that you owe, and the due date. When you get paid, put the money in the envelope. When the bill comes due for that item, pull the money out of the envelope and pay it.

An Example of the Envelope Method

How it works:

  •  You get paid twice a month and have a budget of $500/month for groceries.
  • On your envelope, write "Groceries - $250."
  • From your first pay, you would put $250 in the envelope. The money in this envelope goes for groceries only.
41148614 - close up top view of a man hand holding a pencil to write a note on multicolored envelopes, isolated on white background.
  • When you go to the grocery store, take the envelope with you.
  • You spend no more than the money inside of the envelope.
  • If there is more than $250 worth of groceries in your cart, things will have to go back.
  • To stay in budget, you can purchase items on sale or off brand products.
  • You will get to spend another $250 on groceries after your next pay.

Use the Envelope System for "everything" in your budget, such as: groceries, phone, restaurants, entertainment, gas, clothing, insurance, taxes, etc.

When your money runs out, there is no more money to spend until the next month.

Don't cheat and borrow from other envelopes. If you have money left over in an envelope, put it in an emergency fund envelope for a "rainy day."

If you find that your monthly income is not enough to cover all of the envelopes, you will need to cut back on things. Spending more money than you make is the surest way to find yourself deeper and deeper in debt. Until you can increase your income, you may need to be very careful about your purchases, even look for lower cost housing and transportation if necessary.

Credit cards are a great convenience, but they also create a situation where it is far too easy to spend money that you do not have. The Envelope System brings you back to reality, where you budget realistically for the things you need and save for the things you want.

Why Choose Harold Shepley and Associates, LLC?

At Harold Shepley and Associates, LLC, we have the experience to deal with debt situations of all kinds. We are a full service Law Firm that is client-oriented and will work hard to meet your personal financial needs.

Call us today at 877-827-9006, or complete our easy to use contact form. We're ready to help.

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