Using an envelope
This
system is just what it sounds like it would be. You keep
all your allowance in an envelope. This method of
budgeting to reduce your debt and working towards a debt
free life takes a lot of discipline. If you the type of
person who is are bad with cash and are the type of
spender that will spend the cash because you have it
this system will not work for you. However, it is a
great tool for those who want to seriously not use
credit cards.
Similar to the no cash theory, this system has your cash
readily available to you. Every time you get paid, you
go to the bank and convert all of the check that is not
committed to pay bills into cash. You come home and
divide the cash into a series of envelopes.
One
envelope should be for food, another for gas, one for
entertainment and another for emergency needs. Each
envelope should carry the full amount you are allowing
yourself to spend in each category. That is it. It is
simple and easy to use. You have to be disciplined, but
does not everyone who is trying to get out of debt no
matter what system they are using as a means to budget.
Like the other systems we have covered on article one
and two, this system requires no use of credit cards and
you will never have to worry about interest when you buy
things. When the money id gone, thats it you get no
more you have no more. Even though people will caution
you about having cash at your disposal when you have
problems managing money in the first place, when the
money runs out that is it. Another way to look at cash
only systems as a positive you will most likely find
yourself cautious because you do not want to reach in
the envelope and see no green left once it is gone,
you have no other money.. Because of this, you may very
well end up spending less and less each week.
Be
sure that you plan your envelope categories well, put
the right amount of money in them and do not borrow from
one to use on another. This shows poor discipline.
This
is a really simple system that will not require you to
have to balance a checkbook and you do not have to worry
about hidden fees when you pay with cash either. This is
a good plan for those of you who are not compulsive
spenders. If you are, you have to seek profession help
no matter what form of system you use when trying to get
out of debt.
As
far as emergency funds go, you really have to keep money
in a savings account that has an interest rate so your
money grows if there are no emergencies for awhile. I am
not talking about discretionary emergency money. I am
speaking of money you will have to keep on hand in case
of a major emergency such as car repairs and things like
that. Be sure to put something from each paycheck into
this account each pay period. Put it into an account
that earns interest but not one that you are penalized
for when you withdraw from it. In the long run, you will
not be saving any money and you will essentially be
paying for a place to keep money. Depending on your
person discipline this money can even be hidden in your
home.
I
have a friend that was having debt issues and she would
ask me (because she trusted me) to hide her emergency
money for her until she had a reason to really need it.
This system worked well and only works well when you
have trust and you do not get mad when the person says
no for non emergencies!
Now,
if your budget is too tight and you do not have any
extra funds for such emergencies, you will have to
acquire more debt to pay for that emergency. This is not
the way you want to go at all. You must tighten your
budget in order to account for some emergency funds.
Say, you fall and break your arm and you have no
emergency money to pay for the co-pay and medicine
needed, the time off work, the health insurance in the
first place think ahead about these hypothetical
situations. If you are not prepared, you will go further
into debt with most likely a high rate of interest and
all of your scrimping and saving until that time will
have been in vain for the most part. Do not find your
self in this situation.
Part 4
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