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Before I started couponing and when we were living paycheck to paycheck I used the “Envelope system”. Honestly, I have never learned much about this concept nor did I know that a lot of money guru’s endorse it. I purely did it because it was the best way for me to feel organized, use my scarce and important money wisely and put it where it was suppose to go.

I have a secret…I STILL do it! I LOVE envelopes! Every time I go to the bank and deposit a check and get my cash back I ask them for envelopes.

 If you’re not sure what I’m talking about, let me explain it:

I take our paycheck and divvy it all up to the bills I pay every month. So, my piece of paper would look something like this (varying depending on your monthly bills, this is just an example):

Check $xxxx.xx

Cable – $50

Gas $150

Food $100

Credit card $50

Utilities $200

House payment $1500

Extra $20

Dog food $40

Cat food $20

Then, I take the items I would be getting cash back for (Food, Extra, Dog food, cat food). If these were my bills, that would mean I need 4 envelopes.

I also need to figure out what money bills I need for these envelopes so each envelope contains it’s proper amount of money. So for this example, I would need:

$100×1

$20×4

I would then take the (1) $100 and place it in the envelope I label with “Food”. Take (1) $20 and put it in “Extra”, take (2) $20’s and put it in “Dog Food”, etc.

This is so extremely helpful….it really keeps you organized and it helps you to stay committed to ONLY spending that amount on the specified item which will keep you in your budget.

Here’s how I look at it….if I went to the bank and took the total cash back which in this example would amount to $180 and just stuck it in my wallet. I may be more tempted to spend $130 on groceries since I do have $180 – then I would be short in my other categories. Where as with my envelope system, when I go to the store, I know I only have that money allocated for those items so I am not tempted to spend more than what I have in my envelope.

It sounds so simple (and it is) to make such a huge difference in your financing but let me tell you, for some reason, this little secret works wonders!