Money Mic: ‘How a Simple White Envelope Resurrected My Finances’

Envelope savings

Shannon uses envelopes to sock money away for everything from a new vacuum to a family vacation.

In the LearnVest Personal Stories series, everyday people share the details of their money lives, discussing the individual choices they’ve made and how it’s impacted their financial journey.

Today, one woman tells us how using a nondescript, everyday item—an envelope—helped her transition from being bankrupt to financially flush.

Not long ago, frivolous spending dominated my life. A new pair of shoes, dinner out with friends—it didn’t matter. I spent every dollar as soon as I got it.

As you’d expect, that type of financial behavior carries you down a dangerous path. And sure enough, before I knew it, I was 27 and drowning in debt.

With no savings to my name—but plenty of responsibilities—I knew it was going to take drastic measures to save myself from the money mess I’d created.

Fortunately, my story has a happy ending. I figured out a way to better manage my money—with some help from an envelope.

Bankruptcy and Bills: My $50K Debt Story

My finances weren’t always a downright disaster. At 22, I was thriving as an office manager at a company near Watertown, Wisconsin. I was making about $35,000, and I didn’t have a lot of financial responsibility—until I got the real estate bug.

Since I’d spent my childhood in apartments, I’d always dreamt of owning a home. For fun, I started looking at properties—including a four-bedroom place that really struck me. Best of all, it could be all mine for a cool $125,000—and no money down.

This was in 2004, when banks were giving out loans like lollipops. I ignored my parents’ warnings, charging full steam ahead to become a homeowner.

Just one week later, I’d lose my job, when my employer went belly up. And to make pretty unfortunate matters worse, I had no emergency fund to fall back on. Even though I was able to collect unemployment, it wasn’t enough.

After just four months of struggling to stay afloat and falling way behind on my $1,000 mortgage payments, I decided to sell my dream house through a short sale—for about $6,000 less than the purchase price—and moved into a tiny apartment.

From there, everything tumbled downward.

RELATED: How I Finally Paid Off a Lifetime of Credit Card Debt

  • Hannah

    Eek! This is a gross misrepresentation of the Dave Ramsey system.

    • BeeBee

      I was thinking the same thing….totally from Dave Ramsey’s plan but he’s not credited anywhere.

    • anthonysmom

      That’s exactly what I was thinking! When I read the reference to a “budgeting system” that uses envelopes and saving a $1000 emergency fund, I thought “Dave Ramsey!” Then it went downhill from there…i.e., saving for a trip to Disney & a puppy while still having $800 in college debt and $1000 in credit card debt from 2013! Pay that off and delay the trip to Disney! Debt is debt.

      • mostlywentzel

        There’s nothing wrong with saving for something you want while also paying down debt. She has said that she expects to pay off the student loan in a few months and there’s only $300 in the Disney fund. I wouldn’t call her current plan irresponsible. It sounds like she’s balancing wants and needs.

        • anthonysmom

          I never said she was irresponsible, all I said was pay off the $1800 in debt, then start the savings for fun stuff. Once you have no more debt, those savings accounts grow MUCH faster! A six-year-old will be just as happy with a trip to the zoo or some other local adventure in lieu of a trip to Disney – just until the debt is paid off. My kids somehow managed to grow up just fine without Disney.

          • Paula

            You said “…then it went downhill from there…” Hmm…sounds like you are saying she is irresponsible. For some people, carrying debt helps build credit. I’m not sure why she chooses to keep it but surely she has her reasons. Everyone is different and if Shannon wants to go disney with her family it’s her choice. You may not have gone disney but instead chose other plans for your vacation. To each his own. Cut the lady some slack.

          • anthonysmom

            I MEANT the article went downhill from there, but again, thank you for inferring something I didn’t write. I do believe that I’m entitled to having an opinion based on MY personal experience. That experience includes having paid off $122K in debt in 4 years. To say I detest debt is an understatement. As a result of my experiences, I think carrying those little debts for so many years is ridiculous. I’m entitled to feel that way, just like you can go ahead and feel like it’s ok. We’ve also led 12 of Dave Ramsey’s Financial Peace University classes at our church over the last 6 years, helping over 200 people live on a budget, pay off debt, save for retirement and change their family tree.

          • Just me

            I think it’s important to have something good to look forward to. It’s not like she has spent her Disney fund yet. And it seems like she’s putting less toward that then her other debt,
            I’d go crazy if I worked all the time and had nothing to look forward to.

      • TC Hollis Wagenstein Hurturk

        The only complication is a six-year-old child who needs some appropriate treats and stimulation. They won’t be able to apologize to her years from now and say… “Sorry, we had to put your childhood on hold while we paid down our student loans.” This seemed like a reasonable compromise. Of course, they could have adopted a shelter animal (which would still require some care and feeding) and take a local camping trip, but I’m inclined to cut them a little slack here.

        • Just me

          Yeah,, I didn’t really get the 1400 adopt a puppy fee. Shelter dog,,, shots, fix, maybe some toys and bedding,,, 200 here..

          • Shannon Stone

            The philosophy was this:
            $200 adoption fee
            $600 in additional rent for the first year
            $800 set aside for vet bills
            We didn’t want to have to use up our “people” emergency fund if the dog were to need medical attention. ;-)

          • Shannon Stone

            Typo. $600 vet bills

    • JoleneB

      As much as I like Dave Ramsey, he’s not the first or only one to recommend using envelopes dedicated to certain bills and/or savings goals.

      • BeeBee

        It’s just not the envelopes…it’s the $1000 emergency fund first, and having her daughter essentially earn a commission and divide the money into savings, spending, and charity. Not bad ideas at all…it’s just that this is pretty much straight from DR with no credit.

        • robin

          When you click the hyperlink in the text of the article that says “budgeting system”, it takes you straight to
          That’s enough of a reference/mention/credit to him, isn’t it?

          • BeeBee

            It does now, but when the article was first posted it linked to another LearnVest page about envelope systems.

        • Shannon

          The Lampo Group (Dave Ramsey) is basically a direct competitor of LearnVest. It would not be in LearnVest’s best interest to reference him.

          • BeeBee

            They did, though, eventually. They updated one of the links to go to his site.

      • Tania

        Yup, I remember my parents and grandparents using envelopes for spending back in the day when there were no ATMs. You’d take money out on payday and put aside for food, etc. I also know people that do the envelope system that don’t read/listen to PF materials, just something they’ve always done. Even Dave freely says his ideas are not his original creations, just what he would recommend. The author’s spin on it was for different types of savings too, which doesn’t come from DR. There are very few PF concepts that anyone can claim as an original idea. It is just motivating and educating people on the different philosophies and methods that are already there.

    • JustSaying

      If you guys pressed the hyper link that says Budgeting System you’d clearly see that it leads to a Dave Ramsey site.. And that even though she does not physically state where she got her method from she does Cite her source.

  • Suzanne

    Really inspiring. I like her balance. She gets to decide if holding the $800 in debt is something that she and her family can live with while balancing the priority of living her best life right now with her daughter and husband. She is acting responsibly and that matters more than being a Dave Ramsey disciple. (Isn’t Dave a disciple of Jesus, who was reminded to pay the Temple tax as He went about healing the sick and using resources to do so.) Balance is important for sanity and something awesome to model to kids. Better to stay out of debt, but as important-don’t punish everyone, including your kid, with a starvation diet.

  • Gretchen E.

    People, chill out! She didn’t say she was following the DR example exactly. She does provide a link to his site. Sometimes it helps to check out the entire article before accusing someone of something. And, who cares if she’s putting her own spin on it? Yes, it will take her longer to pay off her debt, but it is her money and she is teaching her daughter to be money-conscious. It sounds like she’s come a long way since filing for bankruptcy!

  • mostlywentzel

    It’s a shame that people are putting down what seems to be a pretty well-balanced means of paying off debt while still working to get what you want. I did this for a while too. Eventually, I started doing the same thing directly with my bank. I have multiple accounts, each with a different purpose (Emergency fund, monthly “slush” fund,” vacation savings, etc). I also track my bills, including payments to these accounts, on a spreadsheet to keep me honest. I like including these contributions as an actual bill.

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  • erif

    Ok, I’m going to be mean here people so…Tony is a “star saver” yet I missed where she mentions how much he had saved before meeting her (?). But I did not miss the fact that (together) they started saving towards the goal of $1,000. Yeah, he’s a star saver alright!

    • Shannon

      One thing to note: a LearnVest writer actually writes the article through interviews. If you wanted every financial detail, the article would be hundreds of pages long. ;-)

      • erif

        I did not ask for every single detail, I just thought that if she mentioned the husband as an all-star saver she could have elaborated a little more. That should have taken a few sentences–definitely not hundreds of pages.

        • Shannon

          She is me. And yes, that fact alone wouldn’t have taken up a ton of room but there were actually a lot of details that were discussed with the writer, but omitted, and I trust entirely that it was to prevent the article from becoming ridiculously long.

          To answer your question, my husband had a good amount of money saved prior to our meeting, which was used for a number of things such as growing his business, paying for our wedding, and building our life together.

  • Paula

    Shannon I am proud of what you and your family have achieved thus far. Sometimes it takes tough situations (bankruptcy) to bring us to great things but I’m glad you are on the right path now. I’m with you on not paying off all your debt as yet. For our family, it’s beneficial to help build our credit score to carry debt. Some of our revolving debt is interest free (medical credit card) and usually we leave a $10 balance every month on regular credit cards which is paid before the next due date. You do what works for your inner circle. Thanks for sharing your experience so people can learnt from this. You daughter is also learning from young about money and that is great. These lessons will stay with her for life.

  • Diana

    He’s not the only one who uses envelopes but it could be him.

  • RonJohn

    This article was written in 2014. Don’t they get paid by EFT directly to their checking account?

    With a cheap computer and internet service, you can log into your bank’s web site and do the same thing. Many let you open new savings accounts on-line, don’t charge fees if you have $25/month automatic transfers, and let you define those automatic transfers on the same schedule as your paycheck.

    So, instead of using envelopes, have your bank transfer the money directly into these multiple savings accounts each payday. Even if you and your SO are paid on different schedules, you can do it.

    • Just me

      Sometimes, it’s easier if you actually see the money real and in person!
      For me, I used to be able to hold onto a hundred dollar bill a lot longer then I could hold onto a 100 dollars in my bank account.

      • RonJohn

        Different strokes, I guess… Whether you use envelopes or bank accounts, the concept is still sound.

  • Just me

    After a divorce In 2007 and bankruptcy in 2008, I started over with a clean slate. In 2011, I lost my job, but managed to get a job paying 10k less in the same company that same year. I managed to pay my house off in 2013 and start saving. I had two kids in college I had to help too… So I didn’t save as much as I had wanted,
    I had what I thought was a three month supply of emergency money, gained using the envelope method.
    In nov of last year, I had an accident and I’ve veen out of work 3.5 months now. I have enough liquid money to pay one more month of bills, but the medical bills are piling up.
    I will be out of work at least another 3 months.
    It doesn’t seem like long enough to bother taking money out of my 401, which I’m not sure how to do anyway. I also have a ten k cd that I csnt touch for another 2 years.
    So I’m starting to get a bit anxious about how I’m going to pay my bills.
    But if not for this envelope method, I would not have had the money in the first place.

    However, the first thing Im going to do when I get back to
    work, is put less in 401 and more in liquid savings. Because what good is having money if you csnt really use it?

    • RonJohn

      “a ten k cd that I csnt touch for another 2 years”

      Why not? There will be a penalty on the interest earned, but interest rates are so low that it will be a piddling amount; maybe $20.

      • Just me

        In theory I could get to it…. But it’s child support money that has been earmarked for college,,, I’d be in violation a verbal agreement. but only if his dad 1. Found out, 2. Complained.