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

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Dave Ramsey envelope system

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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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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
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3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

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Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. 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. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit We also have several resources available to help the borrower make a decision at, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
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2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
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2.47% – 7.99%Undergrad
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Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
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2.72% – 8.17%4Undergrad
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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.