Get out of debt with Dave Ramsey's envelope system
Getting out of debt is important to your financial health. Dave Ramsey is known as a financial guru, giving non-nonsense advice to people trying to get out of debt. You can use Dave Ramsey's envelope system to get your household budget in order and get yourself out of debt.
Instructions
1. Make a list of all the things you want to include in your monthly budget. This includes all of your monthly bills, credit card debt, student loans, entertainment, gas, clothing, and anything else that you might spend money on.
2. Label a separate envelope for each of these expenses and debts. These envelopes will serve as budgeting tools as well as allowances. Don't forget to create an envelope labeled "Savings." Dave Ramsey always stresses the importance of paying yourself (in the form of putting money into your savings account) every pay period.
3. With a piece of paper, pencil, and calculator, figure out how much income your household brings in each month. Subtract the amounts that you need for your monthly bills (mortgage, utilities, cars, insurance, credit cards, loan payments, loan consolidation payments, etc.).
4. Now, figure out how much you can need to budget for necessities that are not bills (gas, groceries).
5. Figure out what is left, by adding the amounts in step 3 and 4, and subtracting that sum from the amount of money your household earns each month.
6. With this amount, determine how much you want to put away into a savings account each month. This should be between 25-50% of this leftover amount.
7. The final amount (the money that is left after all of your necessities have been paid) is what you'll have left over for wants (as opposed to needs).
8. On each of the envelopes, write the amount that you need to put into it each month. For example, if your monthly mortgage payment is $2000, your envelope should be labeled "Mortgage $2000."
9. Each pay period, cash your pay check, and put a percentage of each debt or bill into its corresponding envelope, based on how many times you get paid per month. If you get paid twice a month, for instance, you'll put half of each amount into each envelope. Using the above example, if you mortgage is $2000 per month, and you get paid twice a month, you would need to put $1000 in the mortgage envelope each pay period.
10. Decide how often you want to make the deposits to your savings accounts. You can either deposit it each time you get paid, or do it once a month. Whatever you do, though, make sure that this money does go into a savings account.
11. For the allowance envelopes (entertainment, clothing, etc.), you can either save up your clothing money until you have enough for that expensive jacket you have your eye on, or blow your clothing allowance on less expensive each week.
12. As Dave Ramsey says, once your allowance money is gone, it's gone. There is no borrowing from one envelope to another. This will help you get your spending under control, and get your family out of debt.
13. Take seasons into account. If you want to take a family vacation, decide how long you'll need to save for it, without disturbing your other debts and savings account. Also, determine in January how much you want to save to spend for the holidays at the end of the year.
14. Read Dave Ramsey's books to get your budget under control, have a total money makeover with your finances, and find financial peace.
Tags: Dave Ramsey, each month, savings account, your monthly, your household, amount money, entertainment clothing