The Envelope System - How I Leveraged It

This is a three-part series on the financial tool called the envelope system. In the series I have covered what the envelope system is (part 1, here), how to set one up (part 2, here) and, as a real world example, how I have leverage it in my finances (today!).

How have I leveraged this system in my own finances? It was easy, I just followed the instructions in my last post and now I have a fully functioning virtual envelope system.

Setup the Accounts to Act as Your Virtual Envelopes:
Once I figured out the categories that I wanted to specifically save for all I had to do was set up an account in ING for it. This is really easy and only takes a few clicks of the mouse. (If you need an ING referral drop me a comment and I will send you one.)


Setup the Automatic Transfers:
Once the accounts were set up, all I had to do was set up the automatic withdrawal from the account that my pay check is direct deposited. I have already calculated how much goes into each account/envelope during the prework so setting this process up is easy.


End Result - Watch it Work:
When I wake up in the morning of the 15th or last day of the month two glorious things have happened - 1. My company has deposited my paycheck 2. My automated envelope system has gone to work. Now when my automatic payments for my car loan and student loans come through, I will be certain that there is enough money in the account to pay for them!


When growing up, I had no problem sticking to the manual system as my checks were not direct deposited. Once my checks were being direct deposited, the convenience of the envelope system had lost its ease and effectiveness. It was a long time till I discovered the wonders of ING and even longer till I discovered the beauty of automatic savings plans.

Juan from millionster.com left a comment about the envelope system and still maintaining the flexibility to plastic in everyday shopping. Well I use the ING debit card. Like everything ING, the account resides online, but they give you a debit MasterCard that you can use for daily purchases. Everything is still linked through the same system!

Here are some other good sites with info on the envelope system:

• Beating the Joneses (1, 2, 3)
• Dave Ramsey
  

I hope you enjoyed the series. Let me know what you think.

Cheers,
TMac