The Envelope System Saved This Couple $21k — and Some Major Headaches

Dave Ramsey envelope system

There are two pockets in Scott Grierson’s wallet. The front is for money he can spend.

The back is for money he just earned from work. As soon as he finishes work, this cash goes into an envelope, in a drawer, in his home office.

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

That’s why Scott and his wife Luby gave all their money a purpose via a personalized version of Dave Ramsey’s envelope system. In four years, 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

Here’s how they used the envelope system to their benefit so you can follow in their footsteps.

How the Griersons got started

After Luby listened to a 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 says. “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, they readjusted the amounts to ensure they weren’t giving themselves too little or too much to spend each week. When money is left over 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 help 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 this year.

Modified envelope system

Image credit: Scott Grierson

4 ways they edited the envelope system to work for them

Having a child and a fluctuating income has forced Scott and Luby to edit the envelope system 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, and dining out.

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

Here are four more ways they make the method work best for them.

1. Shifting money between envelopes

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

At least once a month, however, Scott says he and his wife run out of grocery money while the entertainment envelope bursts 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 says.

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 says. “You just can’t do as much [as parents], so it’s easier to not spend money.”

2. Holding weekly, monthly meetings

The envelope method advises its users to call emergency meetings when spending over budget. The Griersons decided they’d hold 10-minute weekly meetings to discuss everyday spending. They always talk before shelling out $100 or more, for example. Or, they’ll talk about skipping a dinner during a week that they buy $70 worth of baby formula.

The couple’s longer monthly conversations focus on longer-term savings goals. They have an annual goal of saving $2,000 for their Christmas and New Year’s plans.

“We treat every upcoming expense as debt,” Scott says. “We’re always paying off everything before we spend it. That way, we live within our means.”

There’s also a plan for the unexpected. One of their current goals, for example, is to replenish a five-month emergency fund that was depleted, in part, by an unforeseen trip to visit family.

Communication is key. Scott says 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 says. “It brings a sense of calm and peace to you because you no longer have to worry.”

3. Filling 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 delivering math education on 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 [we] didn’t have a plan, we’d be screwed,” Scott says.

Fearful of taking on debt, planning allows Scott to spread his volatile earnings over a year. He uses his cash to fund the envelopes — hence the two pockets in his wallet — 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 taxes in April.

4. Adding credit cards to the mix

The envelope system leaves no room for credit cards. Scott, who earns much of his tutoring income in cash, agrees.

“Let’s say your clothes budget is up to $300,” he says. “You can go to Amazon 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 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 a budget 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. They also spent a month in Florida, where they married. In addition to paying for about half of their $25,000 wedding, they’ve also 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,” says Scott. “But whether you’re a math teacher or not, you have to be able to handle your finances, right?”

Tweaking the envelope system for your money

Consider creating a budget or using an alternative strategy or tool to monitor your finances. You can begin by building a $1,000 emergency fund, as the Griersons did four years ago.

From there, figure out how much you spend on groceries and everything else. Scott recommends 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 says. “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,” he added, “you’ve got to be willing to make a sacrifice.”

Don’t worry about the smaller details of the system. If you never use cash, for example, use the debit card in your wallet and a spreadsheet on your computer. Edit the envelope system to your benefit and you can accomplish your own financial goals, too.

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