Money doesn't grow on trees.

About 4 years ago, my family and I decided to completely change our finances.  My second child, Ida was going to be born and I was also quitting my job.  This was a huge step for me, for all of us.  It meant completely changing our spending habits.  Going from a two income family, to one was going to be a big adjustment.  In the past, we really never had to worry about money.  We always had the finances to do most of what we wanted and never really gave spending much thought.  We have never been extravagant people, but we definitely wasted money.

We didn't want to end up going in to debt and certainly didn't want to make our shortage of funds hard on the family.  We knew that the way we spent money in the past wasn't going to work with our new lifestyle.  It's amazing how much money we found out that we didn't even need by downsizing and focusing on priorities.

We made the choice to use a cash envelope system when I stopped working.  This means that the money we spent on things that weren't automatic bills were taken out as cash and put in to separate envelopes each month.  By automatic bills I mean our house payment, electricity, internet and insurance.  Other than that, all expenditures were taken out as cash and put into their designated envelopes.  I have had several people tell me that this is the "Dave Ramsey" way of doing things.  I have never seen what he does, I just know that this is the way we do it.  The theory behind our envelopes is that there is money there when it is needed and if the amount is exceeded, too bad.  If there is money left over, great.  You save it and it builds up for those unexpected expenditures. 

So, what do we have envelopes for?  Well, I will tell you.  First, let me say that this is what works for us, based on what we spend money on.  It will be different for each family.  The amount you put in each envelope per month will also vary dramatically.  Our envelopes consist of the following:

1. entertainment
2. clothing
3. automobile
4. gas
5. gifts
6. animal
7. household
8. hygiene
9. Dustin personal
10. Katie personal

This system has worked out well for us.  It's not perfect and we mess it up sometimes by going over budget on occasion for those unexpected things.  You can't have an envelope for EVERYTHING.  This system keeps us true to our budget and if there is some left over, it's great, if not, we know we can get by.  It's really stress free once you get used to it.  It took me a good 4 months before I could actually stick to it and get used to carrying the cash with me instead of putting everything onto a debit card.  It's a discipline that has to be learned, but once learned it's incredibly satisfying and rewarding.  We can all do so much more with less.   If you haven't already, give it a try, I dare ya.  After all, money doesn't grow on trees.