How to Save $1000 a Month Using the Envelope Systerm

Use the envelope system and save $1000 per month.

According to the Federal Reserves G.19 report on consumer credit, as of March 2010, the total U.S. consumer debt is $2.42 trillion. Though debt has dropped significantly since the beginning of 2010, budgeting, saving, and a debt-free lifestyle has become more of a priority during our economic downturn. And, according to a recent report conducted by Packaged Facts, cash usage has become the payment of choice for more than 50 percent of U.S. adults. Using cash to pay for certain expenses, you can potentially save at least $1,000 per month.

Things You'll Need

• Monthly budget
• Envelopes

Instructions

Getting Started

1. 

   Save and watch your savings tank increase.

   Look at your monthly budget. Assess your monthly income. Then, identify your fixed expense totals such as mortgage, homeowners dues, utilities, car payments, credit card payments and insurance. Consider developing a computerized budget itemizing your fixed expenses first and your discretionary income items second. Then, list the months of the year across the top of the spreadsheet.

2. 

   Using a budget creates commitment.

   Subtract your fixed expense total from your monthly income to find your remaining discretionary income. This is what you have left to spend. From this amount, you will be able to construct the additional items in your budget. You can do this by listing the rest of your typical monthly expenses including groceries, spending money, cleaning help, yard maintenance, pets, sports habits or fitness club, eating out, extras for the kids, savings, personal care and clothing.

3. 

   Stop and reassess your spending.

   Consider eliminating items in your discretionary list that you can live without. Place a star beside the items you can reduce or completely delete from your discretionary list. Your willingness to reduce spending in these identified areas will enable you to save up to $1000 a month. Though this is a challenging step, you will eventually see the benefit.

4. 

   Identify areas to save.

   Select your envelope categories in your budget. Envelope categories will consist of the discretionary income areas you "starred" in your budget such as groceries, eating out, miscellaneous expenditures, personal and allowance.

5. 

   Use and recycle labeled envelopes.

   Label your envelopes. Use one envelope per category you previously defined. Consider labeling each of your envelopes and then recycling them for subsequent months.

Saving Money

1. 

   Stick to your menu and grocery list and save $300 per month.

   Use a grocery envelope. Groceries are expensive, but you can moderate your spending and increase your savings by planning ahead. Create a weekly menu and a list based on that menu. Before you go shopping, check the online weekly sales and coupons, and consider incorporating these sale items into your menu. Be willing to buy generic or store brands. Many include the same ingredients as the brand name product. Take your grocery envelope, a calculator and your list with you. Stick to your list and don't buy extras. If you have budgeted $200 per week, challenge yourself and reduce it to $125. These steps can easily save you $300 or more per month.

2. 

   Decrease eating out and save $444 per month.

   Use an envelope for eating out. Eliminate eating out on a regular basis. Let eating out be a luxury verses a habit. Incorporate the "one-time-per-week" rule, and you will notice significant savings. Begin slowly by cutting back up to two times per week for lunch and dinner. Two lunches at $12 per lunch is $24 per week, which is $144 per month saved. Two dinners per week at $25 per dinner is $50 per week, which is $300 per month. This simple reduction totals $444 per month in savings.

3. 

   Cut back on extras and save $85 per month.

   Use an envelope for miscellaneous items. Extra "stuff" can add up quickly. Bottled water costs more per gallon than gasoline. Consider purchasing a filter for your water or using tap water. Convenience store snacks cost twice the amount of snacks that are bought in bulk at the grocery store. Daily trips to premium coffee shops can cost up to $25 per week. Cutting back to two days verses five days can save $15 per week, or $60 per month. Using the allotted amount of cash for miscellaneous items can save up to $85 per month.

4. 

   Using cash allowance can save you $200 per month

   Reduce spending by getting an allowance. Withdraw a cash allowance one time per week for each member of the family, and put it in the allowance envelope. In addition to saving, this is a great opportunity to teach your kids accountability for expenditures. Make sure you withdraw from your personal bank so that you do not incur ATM charges. Using a debit card at will enables spending. These fees can cost up to $3 per swipe. A study performed by McDonald's proved that consumers spend "47 percent more using credit verses cash." This can equate to a minimum of $50 per week in savings, which totals $200 per month in savings.

5. Celebrate your savings. By implementing the simple steps described, you will save at least $1,029 per month. Use the $29 for fun money, and you will have a remaining savings of $1000 per month.

Tips & Warnings

• When the envelopes are empty, no more trips to the ATM. Be disciplined!

References

• CreditCards.com: Credit Card Statistics, Industry Facts, Debt Statistics
• Qiam.org: Consumer Payment Trends in the U.S.
• Daveramsey.com: Dave's Envelope System
• Daveramsey.com: The Truth About Credit Card Debt