The Envelope System

My husband and I use "the envelope system" each month for our budget. He's a teacher, so he gets paid monthly instead of weekly or bi-weekly. It takes a great amount of planning to make sure that we aren't out of money or food by the 30th of each month. Here's how it works for us:

• Each month, when his check is deposited into our checking account, I sit down and pay all of our bills online. TIP: I keep a spreadsheet of what I pay to each company (utilities, etc.) each month, so that when tax time comes around, we can easily find our averages for our CPA to deduct. (We have an LLC and I'm considered self-employed, so we can deduct our office space and a portion of our utilities, mortgage, etc. as business expenses.) 
  
• After our bills are paid, we go to the ATM, withdraw cash and put CASH into envelopes for each of our major monthly categories. Depending on how much money you have to spend and how OCD you want to get with your envelopes, you can have more or less categories. The ones we use are: Groceries, Eating Out, Miscellaneous, Drugstore, Chip and Leigh Ann. We keep money in the checking account for Gas so that we can pay at the pump. (The Chip and Leigh Ann envelopes are for our own "mad money"--Chip's usually gets spent at Home Depot for stuff for the yard--his hobby--and mine usually gets spent either at Michael's, JoAnn's, Hobby Lobby or Home Goods.) :)
• The most important part: Once the money is gone from an envelope, then it's gone. There isn't any more. Again, this is about self-discipline. It's not easy, but it keeps us from over-spending and makes us stay conscious about where the money is going.

This has worked so, so well for us. I typically handle the money, bill paying, etc. and we used to fight about where the money went. Chip felt like he didn't have a say in the day to day expenses and I felt like I was doing the best I could--why couldn't he go online and check the accounts the same way I do? This has saved us so many arguments. Now we each have our own money each month that we can budget however we like (guilt-free pedicures, anyone?!) and we can each easily check the envelopes to see what's left in a particular category. We work together to decide how we're going to spend our eating out money and before we take a chunk out of the miscellaneous category, we check with each other to make sure we agree on the expense. And finally, my favorite part: NO MORE CHASING DOWN DEBIT CARD RECEIPTS! I felt like all I did was check the accounts to stay on top of what money had been spent between the two of us and it was just too easy to screw up. Now, we're working only in cash, so other than gas, I don't have to worry about the debit cards at all. And we've put the credit cards away!

This probably sounds pretty wacky if you're not used to it, but it has worked so well for us. It makes us feel like a team instead of being isolated in our spending. It has also kept us well within our monthly budget...sometimes with money left over! If you find yourselves fighting about money in your relationship, I encourage you to try it--even if it's just for a month...you'll be amazed at how well it works and how much arguing it eliminates.