Debit Diet: "Where da, where da cash at?"

I'm in complete reform mode. Last night I did my federal tax return, started on my FIVE state returns (traveling all of the time has it's cons), and put together my debt snowball budget! I'm happy to say that my snowball has me paying off all of my debt (with the inclusion of my private school loans and the exclusion of my federal school loans) by the time I'm 30. I will see my first major payoff (credit cards) by May 2011 and I will have paid off a small school loan by the beginning of 2012. My car loan and larger school loans take a little longer but either way it goes...I'm stoked!

In addition to implementing the snowball, I came across another one of Dave Ramsey's amazing ideas that I am very excited to share! Dave Ramsey's....

Cash Envelope System

The way it works:

1. Label envelopes with different budget categories such as, food, miscellaneous, entertainment, gas, etc. Dave says you can do this for all of your budget categories but for me, I'd probably only want to do it for the ones I actually spend money on throughout the month. I have no need for a bills envelope because I pay all of my bills via automatic debit, which many of you may do as well.

2. Once you get your paycheck, you cash the amount of money you are to spend on these categories, and put each respective amount in its envelope.

3. As the month goes on, whenever you make a purchase, you take the money for that purchase out of its rightful envelope and you record the purchase on the envelope. Once all of the money in an envelope is gone, you can no longer spend money from that category.

For those of us who don't want to carry a lot of cash on us, or fumble around with 5 or 6 cash filled envelopes, we can do the same thing with our debit card. Instead of putting cash in the envelopes, we can make a debit card purchase, then record the purchase on the respective envelope and insert the purchase receipt in the envelope. Once we've reached our monthly max in any category, we can't use our debit card for those purchases anymore until the next month.

I'd like to add a component to this that I don't think Dave came up with. Once putting this into practice for maybe three months or so, I'd like to challenge us to deposit any excess money unused at the end of the month into our savings account. Of course that money could rollover to the next month but in order to help with discipline I think it would be more beneficial to get used to being limited to a specified amount of money each month. If you don't use it, you save it. Just a nice way to beef up the savings over time as well.

I'm going to implement this spending system in March. I shall let you all know how it goes! And  for those who would like to take the journey with me, let me know!

P.S. I wanted to name this post...Don't be surprised when she ask...."Where da cash at?"...and I would've, but it was too long.

Ta ta!