You are reading Week 20 of 52 Weeks to Eliminate Debt & Curb Spending. Please read the overview here to learn more about the series & get your FREE financial planner. If you just joined us, please start with week 1.

If you have looked for any information in the past regarding getting out of debt,  Dave Ramsey is a familiar name.  One of the most popular methods he presents is using the envelope method to help stay on budget each month. This method is a great way to stop overspending. We are going to look at our version of the envelope method this week and hopefully inspire you to use it as well for future months budgeting. While the concept came from Mr. Ramsey,  you should adapt it to suit your needs.

Using The Envelope Method:

The envelope method is recommended because it offers you a chance to see money as it disappears to pay bills. Once the set amount of money has been spent, you have no more to spend. Simple as that.

The envelope system is a great visual and budgeting tool.

However, I am much more comfortable continuing to have my pay check direct deposited into my bank account, and scheduling bills to be paid directly from there. For things like your utilities, mortgage, insurance and vehicle payments continue to pay directly from your bank account. I recommend setting up bill pay with your bank so the check is sent directly from them.  There is no fee and you know it will arrive on time every time.  This step will help eliminate hidden fees as we discussed a couple of weeks ago.

Withdraw cash for groceries, gas and incidentals. At this point, stop by your bank and withdraw the monthly amount budgeted for groceries, gas and incidentals. These are some of the areas we tend to overspend quickly. This money should be there to cover everything from your grocery and household needs, to incidental splurges, lunches out, kids needs and gas.

Once the money has been spent, you have no more to spend until next month or the next payday. This gives you a visual and physical method of understanding how and when you are spending your money. You can put cash money into envelopes designated for each of these areas of purchase, or keep it together knowing it has to work for all of those.

Personally, I separate the amounts out into envelopes.   It’s easier for me to track my spending this way.  I have a separate envelope for each of my “extra” categories.  If you looked at my envelopes you would see groceries, eating out, entertainment, Dana allowance, Derrick allowance, kids needs, house, and gifts.

When money is gone create a spending freeze. This is where the real savings begins. When you set your budget and can’t stick to it, do you typically just pull more money out of the bank to pay for things? Or perhaps you have been using credit cards to make up the difference? When you use the envelope method, the idea is to stop spending when money is gone. On top of that, you hope at the end of the month you’ll have leftover money in your envelope to put back into savings.

When you are out of money – you have to stop spending. No more groceries. No more gas. No more special lunches out, etc.

Another approach is to “roll” the cash from one month the next.  This is helpful if you have a special event coming up.  Maybe you and your spouse want a special dinner out that will cost more than your typical months budget.  Save money prior to the event, so you can splurge debt free.

Every few months I would take out my leftover money and make a deposit into my savings account or into checking to pay off more deft.

If you find yourself going over the amount of cash you have each month.  It’s time to reevaluate your budget and spending habits.

What you need:

The frugal method is to use standard letter sized #10 envelopes.  You can simply write the category on your envelope or tape a spending record on each. I used this printable envelope label when I first started with the cash system.  Recording my expenses forced me to keep track of where my money was going and allowed me to make adjustments based on my spending habits.

You will also need something to keep your envelopes together. Your cash envelopes will become your new wallet so to speak.  I found this one as an example, but you can usually find them in the $1 Spot at Target.

If you prefer to get fancy, purchase Dave Ramsey’s Deluxe Executive Envelope System or a this pretty version of the envelope system.

Using the envelope method is a highly popular way to help you focus on where and how you are spending money. As a result, you often find yourself having a much easier time paying off debt. As you see your money physically leaving your possession you will be less likely to use it.  Trust me – it worked for us!

Week 20 Challenge:

Give the envelope system a try.  Create your envelopes and commit to only spending the amount of cash on hand.

Disclosure: I am not a financial adviser nor do I have formal financial training. All articles are for informational purposes only and should not be interpreted as financial advice or consultation. Please consult your account and/or financial adviser before making changes to your finances. All situations are different, so please consult a professional to determine your individual needs.

You are reading Week 19 of 52 Weeks to Eliminate Debt & Curb Spending. Please read the overview here to learn more about the series & get your FREE financial planner. If you just joined us, please start with week 1.

We have covered a lot of topics so far this year regarding getting rid of debt, and that included our starting posts that told you how to make a functional budget. This week we are pausing to look back and get serious about your household budget.  It’s time to look at some drastic ways to reduce your expenses, so you can pay more toward your debt or save.

Cut back your grocery budget. You can’t cut out your grocery budget, but you can change it drastically. Coupons are free and easy to use to help lower your budget. Various savings and cash back apps for your smart phone are excellent choices as well toward lowering your grocery costs. Cutting back on meats, alcohol and junk foods are other ways you can lower what you are spending. Using menu plans and even freezer meals can stretch that budget even farther and help you to find wiggle room to apply toward your debt.

There are tons of posts to help you get started already on my site.  I have a series on how to save money at your favorite stores which may help reduce your grocery expenses.  If you’re not interested in coupons, take a look at my frugal living articles to help you live well on less.

Eliminate your entertainment budget. This one hurts, but it is necessary. Switch from the weekly entertainment budget to finding free things to do with your family or spouse. Watch movies at home on your streaming service like Netflix or Amazon Prime.

Play board games, or watch a prime time TV show together. Go for walks, visit free art galleries or take in local free musical performances. Halt eating out in favor of making meals together. Eliminate this extra item in your budget and easily free up $100-$200 a month.

If you live in Hampton Roads, I share a weekly round-up of free weekend activities. You can also search for a blog with local events in your area to stay busy for less.

Lower your utility costs. We are spoiled. Yes, that is brutal and may not apply to everyone, but reality is we have become accustomed to the comforts of cool houses and hundreds of TV channels.

Things like changing the temperature on your thermostat, using ceiling fans and avoiding use of the oven in the summer can keep your home cooler.

Throw on extra layers, use wood heat and invest in proper insulation of your windows and doors in the winter. These simple tricks can be the difference between saving or spending hundreds of dollars each year.

It is time to get serious about your household budget, and focus on really seeing your expenses and spending habits for what they are. When you are struggling to pay the minimum balances you sometimes have to adjust your life to reflect the need for more income. To get rid of debt you must make sacrifices. This doesn’t require a diet of beans and rice, but does mean you will need to focus on what is important versus what feels good and is convenient.

Week 19 Challenge:

What expenses can you cut or reduce to lower your monthly expenses?  Jot down ideas on ways to seriously cut the extra expenses from your budget.  Add up the amount and post it somewhere you will see it daily.  Every time you want to lower the thermostat this summer, think about how much additional money you are paying toward your debt and how good it will feel to finally be debt free.

Disclosure: I am not a financial adviser nor do I have formal financial training. All articles are for informational purposes only and should not be interpreted as financial advice or consultation. Please consult your account and/or financial adviser before making changes to your finances. All situations are different, so please consult a professional to determine your individual needs.

You are reading Week 18 of 52 Weeks to Eliminate Debt & Curb Spending. Please read the overview here to learn more about the series & get your FREE financial planner. If you just joined us, please start with week 1.

Did you know that you may have incurred undue debt just because you aren’t paying attention to hidden fees in your accounts? This week we are going to show you how to eliminate hidden fee debts. Even the most careful financial person will miss out on hidden fees that can accumulate on your balances quickly.

Tips to Eliminate Hidden Fees:

Check for monthly account maintenance charges. Everything from your bank account to a secured credit card may be charging you a monthly fee just to maintain your account. While it is common for these fees to be applied, there are many instances where you can switch to a different account or ask for a fee to be waived if your account is in good standing. Shop around for a bank or creditor that doesn’t charge you a monthly maintenance fee.

Personally, I would NEVER pay a fee just to have a checking or savings account at a bank.  Don’t pay extra to let the bank hold your money!

There are also countless credit cards that don’t have an annual fee.  If you’ve previously signed up for a card that waived their fee for the first year, do you know when that fee will be charged?  It might be time to call and make a change to your account.

Find out what falls under “surcharges” on your accounts. At the bottom of many utility, credit card and banking bills you will find items listed as “surcharges”. It is your right to know exactly what is included in those charges. Ask for a breakdown, and dispute items you don’t feel apply to you. While you won’t always be able to have charges removed, you may find that you can. It is one more hidden fee debt that you can rid yourself of.

Go over insurance policies to see what they actually cover. Insurance is a sticky thing to research. Going over insurance policies may be boring, but it can make the difference between paying for something you want and need, and paying for things you will never use.

Check over your auto policy, home owners, renters, travelers, life, dental and vision insurance to make sure you are paying for something that is worth your money. Insurance is a necessary part of life, but sometimes policies vary so widely you will need more information to know you aren’t paying fees for things that won’t apply to you.

Now, I’m not suggesting dropping coverage just to save a few bucks.  The point is ensure you’re not being charged for fees or extra’s that don’t apply to you.

A few insurance policy “hidden” fees:

• Administrative fee to break up your 6-month premium payments into monthly installments.
• Fee added for automatic bill pay or pay-by-phone.
• Extra fee for roadside assistance (which you don’t need if you have AAA.)

ATM fees.  While not hidden, you may be incurring fees each month for using ATM’s that aren’t part of your banks network.  If you go to the ATM twice per week and get hit with a $2 fee for each transaction, you are wasting $16 per month!

As with every step you take toward getting rid of debt, the little things shouldn’t be overlooked. Literally every single dime you can save is one step closer to being free from debt.

Week 18 Challenge:

Pull out all your bank statements, credit card bills, utility bills and insurance policies.  Are you being charged fees that can be eliminated?  Mark up your statements and hit the phone.  Some fees you might have to accept as part of your policy, but others maybe negotiable.

Disclosure: I am not a financial adviser nor do I have formal financial training. All articles are for informational purposes only and should not be interpreted as financial advice or consultation. Please consult your account and/or financial adviser before making changes to your finances. All situations are different, so please consult a professional to determine your individual needs.

You are reading Week 17 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.  If you just joined us, please start with week 1.

There are a lot of expenses that we will tell you are not necessary in your budget, but Savings Accounts Are Not Optional.  A savings account should be considered a mandatory expense.  We are going to share with you some of the reasons why, and ways you can make that happen. Creating and sticking to a savings plan can be a tough thing for many on a tight budget, but the reality is even the smallest amount of savings can help when times get tough.

Why do you need a savings account?

They prevent debt from occurring. Hands down a savings account is one of the most important things in our financial life that will prevent debt from occurring in the first place. Even if you are already in debt, setting aside money for a savings will help to prevent further debt.

For many people, debt occurs when they are forced to use credit to pay for something either in an emergency or due to loss of income. A savings account is one of the best ways to prevent that from being an issue. As you work to get rid of debt, putting off savings isn’t wise. Even though you are trying to devote as much money as possible to paying your debt, you also need to save money in case something happens during that process. You do not want to incur more debt because you haven’t been saving properly.

Something will ALWAYS happen.  It may be your tire blows and needs to replaced.  It may mean your child needs new glasses or your copay for a recent doctors appointment is higher than anticipated.  Whatever the cause, large or small, having money set aside will help prevent further debt.

They are an investment that can earn passive income. Banks offer different incentives and earning potential on savings accounts.  Check around to find the best interest earning account option to meet you needs and start putting aside even just a few dollars a week toward savings.

[Read more…]