Pinch Your Pennies

Did I ever tell you I opened an Etsy shop? 

Yep! (Shameless etsy plug #1: shop for affordable hand-made-with-love goodies geared toward babies and mommies at www.sewyarncute.etsy.com.)

Not that there's anything listed on there yet. I'm working on that. (Sorry, but naps trump crafts when you're 7 months pregnant and Mommy to a 1 year old BOY.) ...And not that I expect to make a profit or retire early or anything either. I plan to set prices just a little higher than my supplies cost (hence the "affordable" claim in the header) basically to "fund my habit" and avoid further causing the hubs panic attacks when he sees "another?!" Joann's Fabrics receipt laying around.

But let me show you what I'm working on! (Shameless etsy plug #2)

 

It's an "Envelope System Wallet!"

It's for me.

I got sick of the weird looks I was getting every time I whipped out my beat up paper envelopes in Walmart and fumbled through them looking for the one labeled "food". So I custom made myself a cute little organizer wallet with a big pocket that can hold fabric "envelopes" of cash. Someday, when I perfect my pattern, these babies might be for sale on the etsy. (Shameless etsy plug #3.) For now, it's making my life a little simpler, and a lot more fashionable than beat up paper envelopes.

..."What the heck is all this about envelopes?" you ask.

That, believe it or not, is what this blog post is all about! (Not shameless etsy plugs.)

   

Remember that whole schpiel I gave you a while back about money? 

Let's recap:

Extreme budgeting + Avoiding debt + Penny-pinching + Investing every extra cent = Super Rich You.

I've been meaning to go a little more in depth on the budgeting part, especially regarding a little something a guy named Dave Ramsey calls "The Envelope System." 

Who is Dave Ramsey? He's a financial guru guy who wrote a book called "The Total Money Makeover" in which he encourages his readers to get completely out of debt and then live on a strict budget, slowly building wealth and assets (instead of pouring all your money into credit card bills each month) until you get super rich. If you're financial goal in life is to live conservatively but comfortably and build real wealth, and if you're a normal person like me who needs down-to-earth people to explain financial concepts in layman's terms, Dave Ramsey is your guy. 

Ramsey, along with some other great, down-to-earth money guys like Dan Celia, Robert Kiyosaki, and Crown Financial Ministries (currently my financial a-team) support a budgeting technique generally known as the "cash system", or "envelope system". 

Here, in a nutshell, is how you budget using the "envelope system":

1. Cut up your credit cards.

2. Hide your debit cards and don't use them except for step #3.

3. Every time you get paid, tithe and pay your bills first, then withdraw the rest of your money from the bank in cash.

4. Get some envelopes and write things on them like: "Food", "Gas", "Baby", "Haircuts", "Eating Out", "Clothing", "Christmas", etc, etc. Better make another envelope called "Monthly Savings" because you are about to be saving yourself a ton of money and you'll need somewhere to put it.  =)

5. Put the amount of money you budgeted from your paycheck for each of those categories into their very own envelopes.

6. Spend like normal, but here's the tricky part: if you run out of money in one of your envelopes, you are going to have to wait until your next paycheck to spend that money again. Or, you can spend from a different envelope, but when you run out, you run out. NO CREDIT CARDS! 

Why it works:

Let me put it this way -- Raise your hand if, every time you use your debit card for something, you run right home and write it down in your checkbook ledger, deducting it from it's budgeting category, while balancing your bank account and seeing how much money you have left to spend. ...Please. None of us do that. We poor newlyweds, just starting out with our limited budgets, tend to spend our money like we're still in college: until it's gone, swiping our debit/credit cards without blinking and crossing our fingers that we won't be in the red the next time we look at our bank statements. 

If you use the envelope system, however, you're first of all guaranteed to never overdraft your bank account again! And, second of all, you're guaranteed to always know where your money is going and how much of it you have left to spend--or save. This is a big deal if you have any intention of getting out of debt, staying out of debt, and building wealth. Not only that, but because paying for things with cash kinda hurts, you tend to save money instead of over-spend. You know, cash makes you flinch a little. That's a good thing. Maybe you don't really need those shoes after all. ...When the hubs and I first started the envelope system a year or two ago, we noticed we consistently had a big chunk of cash left at the end of every pay period. If we used our debit cards instead, we were lucky if we made it to the end of the paycheck without owing the bank. I don't even know exactly why it works out like that. It's just magic. (Or maybe we're just lazy when it comes to bookkeeping.) Anyway...We love it!

So now that you're on board with the whole envelope thing, I'd love to share with you some great ways to save big bucks. Remember, a penny saved is a penny...earned! If you pinch your pennies here and there you can watch them -- literally, with the envelope system -- add up! 

But that's for the next blog post. For now, there's a one-year-old holding a roll of toilet paper with that "watch-me-unravel-this-entire-thing" glint in his eye...gotta run!    

"In the house of the wise are stores of choice food and oil, but a foolish man devours all he has." Proverbs 21:20 (NIV)