How to Use Dave Ramsey’s Envelope Method to Benefit Your Finances

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Dave Ramsey envelope system

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This story was originally published on Oct. 13, 2017.

The envelope method espoused by personal finance expert Dave Ramsey is a useful strategy for beginning budgeters, including student loan borrowers looking to maximize their cash flow. It’s more attractive than other strategies because it requires you to physically handle your expenses – by categorizing them with cash-filled envelopes.

That’s what drew Scott Grierson and his wife Luby to the Dave Ramsey envelope system.

“It has a name, it has a purpose,” said Scott, a self-employed tutor and teacher. “If your money doesn’t have a purpose, it’s easy to spend it on a whim.”

In four years of employing the envelope method, the Griersons accomplished the following:

  • Paid $5,800 of school tuition and expenses without resorting to student loans
  • Built a $15,000 emergency fund
  • Saved $6,000 in cash
  • Invested in four mutual funds to save for a future home down payment

Let’s review how the Griersons got started with the envelope method, how they broke some of Ramsey’s rules for their benefit – and how you can get started with this budgeting strategy.

The envelope method: How the Griersons got started

After Luby listened to a side-hustle podcast describing the envelope method, she told her husband about it. Having never budgeted, Scott knew his days of running up a tab at the bar were numbered.

Following the envelope method’s formula, they estimated their weekly spending on groceries, bills and nonessentials like new clothes. They lumped those latter categories into one envelope called entertainment. Then they earmarked $100 for groceries and $350 for entertainment.

“The system is supposed to make you mindful of your spending money,” Scott said. “I think we had too much money to be mindful of it. It was, ‘We still have $100, I should buy this!’”

Little by little, the Griersons readjusted the amounts to ensure they weren’t giving themselves too little or too much to spend each week. When money remains at the end of a week, it goes into savings instead of fattening the envelope. The envelope is then refilled with new income.

The small weekly savings helps to fund big goals. The couple saved $5,000 this way in 2016 before hitting the pause button on a savings goal for 2017: They welcomed their daughter into the world earlier that year.

4 ways the Griersons improved the Dave Ramsey envelope system

Even with planning a baby budget, having a child and a fluctuating income forced Scott and Luby to edit the envelope method for their use.

The Griersons broke a Ramsey rule by creating one entertainment envelope instead of dedicating envelopes to all the smaller nonessentials, like:

  • Clothing
  • Technology
  • Dining out

“We thought it was overwhelming the way [it was] designed, so we simplified to make it work for us,” Scott said.

Here are four more ways they make the Dave Ramsey envelope system work best for them.

1. Shift money between envelopes

The envelope method stresses the importance of keeping each envelope separate from the others. You’re not being disciplined enough to limit your spending on clothing, for example, if you need to borrow from your restaurants’ envelope. It’s like robbing Peter to pay Paul, the thinking goes.

At least once a month, however, Scott said he and his wife run out of grocery money while the entertainment envelope is bursting at the seams. But they don’t feel bad about borrowing from entertainment to buy more food.

“But we never use grocery money to buy shoes,” Scott said.

Becoming parents has also naturally adjusted their spending. They used to spend $40 to $50 at the bar after playing volleyball with their friends. Not anymore.

“A beer becomes a onesie,” Scott said. “You just can’t do as much [as parents], so it’s easier to not spend money.”

2. Hold weekly, monthly meetings

The Dave Ramsey envelope system advises its users to call emergency money meetings with your significant other when spending over budget. The Griersons decided they’d hold 10-minute weekly meetings to discuss everyday spending as well as longer monthly conversations to focus on savings goals.

Agenda items have included:

  1. Skipping a dinner out during a week that they buy $70 worth of baby formula.
  2. Annual goal of saving $2,000 for their Christmas and New Year’s plans: “We treat every upcoming expense as debt,” Scott said. “We’re always paying off everything before we spend it. That way, we live within our means.”
  3. Current goals to replenish a five-month emergency fund that was depleted, in part, by an unforeseen trip to visit family.

They also always talk before shelling out $100 or more for an expense.

Communication is key. Scott said the system only works because he and his wife both believe in it.

“I don’t think we’ve had a money argument in four years of doing this,” he said. “It brings a sense of calm and peace to you because you no longer have to worry.”

Are Dave Ramsey’s recommendations right for your finances?
How the Dave Ramsey Budget Works
Can Ramsey’s “Baby Steps” Help You Escape Debt?

3. Fill envelopes with inconsistent income

The envelope method was built for salaried professionals like Luby, a physical therapist assistant. She earns the same amount of money with each paycheck.

Scott, on the other hand, runs a small mostly-cash business, tutoring children in their homes and giving math tutorials through his YouTube channel. During the summer months, he might only earn $200 to $500 in a given week. In the fall, he could bring in anywhere between $800 and $1,200.

“My money is so scattered that if I didn’t have a plan, we’d be screwed,” Scott said.

Fearful of taking on debt, planning allows Scott to spread his volatile earnings over a year. He uses his cash to fund the envelopes and contribute to big savings goals. Luby, meanwhile, takes care of the apartment rent and monthly bills with her consistent paycheck.

As a private contractor, Scott also uses the envelope method to create a separate savings goal: having the money on hand to pay his freelancer taxes come April.

4. Add credit cards to the mix

Believing that credit cards inspire consumers to make unnecessary purchases, the Dave Ramsey envelope system leaves no room for the plastic presently in your wallet. Scott, who earns much of his tutoring income in cash, agreed.

“Let’s say your clothes budget is up to $300,” he said. “You can go to and buy $300 of clothes in one click. There was no resistance to spending the money. But if I go to Old Navy and physically pull $300 out of my pocket, it’ll make me think twice about what I’m buying.”

So why does the Grierson household have four credit cards? To build the credit needed to buy a home.

Two years ago, Scott couldn’t even qualify for a credit card. Luby made him an authorized user on her cards. After making timely payments on the couple’s cable, electric and gas bills, credit card offers started arriving in the mail.

In 18 months, Scott said he increased his credit score from 640 to 758, besting Luby’s. And two months ago, the couple was preapproved for a home mortgage.

Not letting the envelope method get in the way of a good time

Scott knows what you’re thinking. No, he and his wife aren’t hermits. Since using the envelope system, they have…

  • Vacationed to Europe twice
  • Spent a month in Florida, where they married
  • Paid for about half of their $25,000 wedding
  • Footed the bill for having their first child

And, no, you don’t have to be a math teacher like Scott to make this work. The whole thing was actually Luby’s idea in the beginning.

“I certainly enjoy looking at the numbers, and that makes the system appealing to me,” said Scott. “But whether you’re a math teacher or not, you have to be able to handle your finances, right?”

4 pros of the envelope method 4 cons of the envelope method
  1. Your finances feel more organized, particularly if your household has two incomes.
  2. You’re more likely to pay your bills on time – and be disciplined about unnecessary spending.
  3. You’ll avoid overdraft fees on your checking account and unnecessary credit card debt.
  4. It’s nice to have cash on hand in case of emergencies.
  1. Your whole family might not be on board, and getting started can feel like a lot of busy work.
  2. Accounting for variable expenses can feel like guesswork.
  3. You’ll have to go through the machinations of cashing your paycheck or visiting the ATM to physically fill the envelopes.
  4. You’ll miss out on credit card rewards.

How to create your own version of the Dave Ramsey envelope system

Consider creating a budget or an alternative strategy or tool to monitor finances. You might begin by building a $1,000 emergency fund, as the Griersons in 2013.

From there, figure out how much you spend on groceries and everything else. Scott recommended tracking your spending for two weeks and then dividing by two to find your weekly average in each category.

Then zero in on where you can make cuts.

“For us, it’s going out Friday night, not going out Tuesday night, Friday night and Saturday night,” Scott said. “That’s because if you’re doing this system, you probably have some kind of financial goal, whether it’s getting out of debt or buying a house or whatever it is.

“If that goal is important to you, you’ve got to be willing to make a sacrifice.”

Don’t worry about the smaller details of the Dave Ramsey envelope system. If you never use cash, for example, use the debit card in your wallet and a spreadsheet on your computer.

Edit the envelope method to your benefit, and you can accomplish your aims, whether to pay down debt or save up.

Steps to get started with the envelope method
  1. Track your spending and income, perhaps using a budgeting app.
  2. Create spending categories and limits that cater to your financial goals.
  3. Label your envelopes and fill with cash from your paycheck.
  4. Access the envelope each time you have an expense.
  5. Stop spending once the envelope is empty.
  6. Move leftover money in the envelope toward your financial goals.


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Fixed rates from 2.74% APR to 6.74% APR (with autopay). Variable rates from 2.25% APR to 6.39% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 ( Additional terms and conditions apply; see for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

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Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.

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Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.