It is Monday, and that means a Money Monday post! This week my friend Mandee from The Kitchen Wife is sharing how she and her husband found financial peace by going to a cash-only envelope system.
My family and I are big Dave Ramsey fans, and are getting back on the wagon with his program. Mandee and her husband don’t follow DR to a T, but I think her story will still resonate with everyone trying to achieve a debt-free lifestyle!
Here is her story:
This is not a rags to riches story. It is not one of those stories where I was on the verge of losing everything, and Dave Ramsey came in to save the day. Those stories are amazing, but they are not mine. No, this is the story of the American dream. You know the one. Living in excess with the credit card debt to prove it. Yes, my husband and I had been married nearly 14 years. We had traveled, bought all the fancy gadgets, book upon book, and CD after CD. To the outward eye we were living the dream, but behind closed doors, we were financially falling apart.
I remember, every Monday, when he would sit down to do the weekly budget, he was so stressed that I would actually leave the house because I knew that the evening would not end pretty. Our out of control spending was not only putting us on the road to bankruptcy, it was DEFINITELY taking its toll on my marriage. The future looked bleak at best.
Then, our first BIG life-changing moment happened … my father-in love passed away.
Now we found ourselves moving my 90 year old mother-in-love, who was diagnosed with Alzheimer’s, in with us. Due to her special needs, I had to quit my teaching job of 12 years, and become a full-time wife and care taker. I wish that I could tell you that this is where I pulled it together and got back on the straight and narrow path, but actually this is where my out of control spending spiraled even further. I was depressed and Amazon became my best friend. Needless to say, things on the relational front were starting to show signs of wear as well.
Life went on this way until January of 2014, when I stumbled across a blog issuing a 30-day no spending challenge. In a nut-shell, this particular blogger challenged you to spend nothing past what you absolutely have to for 30 days. NOTHING. You live on what you have and make it work. The idea was for you to realize that you don’t NEED all of these things to be happy and find contentment, as well as helping you get a better idea of where all your money is going. I knew instantly that God was leading me to accept this challenge. Game on!
I told John, my husband, what I was doing and he laughed it off thinking that, like most of my IDEAS, this would pass. However, it didn’t and at the end of the 30 days I had the numbers in the bank to prove it. Just by one of us pulling in the reigns for one month, we were able to financially break even for the first time in YEARS! It was at this moment that my husband was on board and we were about to take the first steps, together, to financial freedom. But where to start?
It was not practical for us to live a life of deprivation. Just the notion of that was setting us up for failure. We had lived a life of too much excess, for far too long to go cold turkey minimalist like that. So what were we going to do? I mean, there are so many options out there for turning around your finances. We have all sorts of financial counseling agencies available to us, for a price. And, as I mentioned before, Dave Ramsey has developed several programs that have proved to be VERY successful to thousands. However, upon doing our research, John and I didn’t feel drawn to or connected to any of these options. No, when it came down to it, we went to our roots. We went to cash only, envelope living.
What is this you ask?
Basically, we labeled an envelope for every area in our budget, and at the beginning of the month, we withdrawal cash, place each allotted amount into its envelope, and put the debit/credit cards away. How did we do it?
Well, when we decided this was our plan of action, we took our laptop to McDonald’s ordered a couple coffees and went to work. First we wrote out all of our expenses. Secondly, we added things like pet care, house maintenance, car maintenance, etc. Then on to more personal things.
When setting yourself up to make a HUGE financial lifestyle change, the NUMBER ONE THING you must do is be realistic about the way you live.
When John and I sat down to do our budget, we not only focused on the MUSTS, but the WANTS as well. For example, along with budgeting our bills, groceries, etc., we have envelopes for things like movie nights, birthdays/Christmas/anniversaries, vacations, and we have “free spending” money allotted for both of us as well. We want to live and enjoy life, but we don’t want to be in debt to do it.
Keep in mind, this is MY story. Our finances at this point allowed for this kind of budgeting. Maybe you can only fit in a little extra spending money or a date night. The idea is to budget for things that you enjoy as well as need. This way, you will not become bitter about the change and be tempted to fall back into your old habits.
Now, don’t let this next part scare you. Once we had sat down and worked out our entire budget, we realized we were only going to bank $3.00 a month. WHAT!?! That was scary, but we had to remind ourselves that one, we were keeping a large portion of our money in cash savings, and two, this was just the first step to something better. Remember…baby steps. Next, be prepare to rethink the way you shop.
One of the questions we had in beginning this cash only lifestyle journey was, “How in the heck are we going to go shopping with these envelopes!?!” I will never forget the first time we went into a store to buy a couple of groceries and some toilet paper. My husband was like “Here, you pay for it because this is just a little embarrassing.” Why embarrassing? Well, when you are living this envelope lifestyle, be prepared to shop with multiple transactions. If I go to Walmart, and I buy groceries, toilet paper, and let’s say a candle for my kitchen, I will make three transactions. One out of my toiletries envelope for the toilet paper, one from the grocery envelope for my food, and one from my free spending money.
Yes, there may be a cashier or a fellow patron who gets a little testy about this, but here are my feelings on the matter. They are aren’t paying my bills or managing my finances so…relax. It’s going to be okay. To be honest, when someone actually musters up the courage to ask “why so many transactions?” I am able to share a little of our story, and people are very surprised and often times inspired to do the same.
After a couple of months of living the envelope way, John and I began to discuss attacking our debt. You see, I mentioned before about his father’s passing. Because of this, we had a little nest egg in the bank. Up until this point, we or rather I, had been blowing right through it. But now, we had changed the way we look at money, and how we spend it, and we were tired of living in debt. This is where we decided to take the real plunge. John and I decided to dip into the savings we had and pay off ALL credit card debt. This was scary because this was our future, but in the end we knew the credit card debt was killing us. So we prayed, we committed to supporting one another in this, and we wrote the checks.
All of the sudden, that $3.00 a month in the bank turned into to several hundred dollars in the bank, and in just a couple of months we have already recouped a large portion of our losses. Not mention, we are coming out ahead every month! I realize we had the luxury of a nest egg, but with living the envelope life, you can budget to take down one credit card at a time, and month by month you too can and will see those gains.
Since January, we have been able to plan a vacation that is ALREADY paid for. We have been able to go away for the day on our anniversary, do whatever we wanted, and not have to worry about the hit on the bank account. Christmas is already taken care of. We are currently remodeling a room in our house that we will not have to go into debt for. The only things we use the debit card for now is gasoline for our vehicle, and a couple bills we pay online. Other than that, we are a cash only family, and though it has been an adjustment, it has changed my life! We are no longer drowning in debt, and I am no longer leaving the house on budget night. In fact, John and I have a little victory dance we do every week now!
Do you use a cash envelope system? If you are struggling with how to start, or what envelopes to even have, click here for a copy of my free monthly budget printable. Every family will have different envelopes and different needs, but this is a good starting point.