How to Lower Credit Card Debt Using Envelopes

The average person in the U.S. has approximately $10,000 in credit card debt, according to Cardtrak.com. What’s a person with credit card debt to do? Here I offer some advice as to how to get that credit card balance lower or better yet, eliminate the debt completely.

First, you will need to start a budget and try to stay on it.

Finance Tidbits: Envelopes Method

Try using the envelope method to curb your spending. My mother-in-law swears by it. Take a box of envelopes and write on the front of each one an expense for the month that you have listed on your budget sheet. Every month, as your income comes in, break down what you wrote in your budget and put the cash in those envelopes. When the money runs out, you can’t spend any more.

Step by Step Guide

  1. Buy a box of envelopes.
  2. Make a budget with monthly expenses separated, for example, electric bill, cell phone bill, entertainment, vacation, etc.
  3. Take an envelope and mark the name of the expense, for example, electric bill, you get the picture.
  4. When you get paid, get cash and break it down, then place the budgeted amount in that envelope. Also write the amount that you are putting in the envelope, and date it. Let’s say you allot $250 a month for your electric bill. Put $250 in the envelope labeled “Electric”. When the bill is due, take it out of the envelope and put in your bank account, write the check and mail.
  5. At the end of the month, look in each envelope, if there is cash left over, collect it, put it in the bank and write a check to go to your credit card or put it in savings. This does not apply for those expenses that you are collecting each month for something like vacation or emergency fund for car repairs/house repairs, etc. Many choose to visit relatives for vacations where it is free, until they get the credit card situation resolved. My husband used to take an amount that could be used for a car payment and put that in an envelope. When there was enough for a nice dependable used car, we would buy a much needed car. This eliminated the need to get an auto loan with high interest.
  6. Cut back on anything that you can, such as making sure the kids turn off the lights, limiting shower time to 10 minutes instead of 20 minutes if you have an electric water heater. Turn the furnace thermostat down a couple of degrees or air conditioner up a few degrees. Open the windows during spring and fall and turn the thermostat off to save a few bucks. Eat out less. Try to find things to do that are free. Use generic. Use coupons. This will lower your expenses and give you more to pay down your credit card.
  7. Make a commitment, don’t say, “well, I gave up that, so I can have this”. Too often, we do that instead of putting any extra money toward the debt or putting it into savings.

Let’s say you have your entertainment amount for the month, you’ve gone to the movies, taken the kids bowling and then your entertainment envelope is empty. What’s the solution? That’s easy, no more going out for entertainment for the month. Get your family together for game night (at home) or do a jigsaw puzzle together. Many good conversations are had during puzzle time.

The next month, instead, try a Redbox $1 movie rental and make your popcorn at home, then promptly take the movie back. Take the money you would have spent had you gone to a movie theater and pay down a credit card a little at a time, on the highest percentage rate credit card first. If you do this on several expenses, you will start making a dent in what you owe. Be patient, your balance didn’t get that high overnight.

Ask your family members for suggestions on how to entertain with less money. You might be surprised at how creative they can be. And, with family involvement comes family bonding. Plus you are teaching your children a lesson to help them when they become adults on how they can remain debt free. We often forget this as we live in a time where we want to give our kids everything. Remember, you are raising your children to become adults. Do a search online for “free things you can do with your kids” to get even more ideas.

To reiterate, at the end of the month, if there is any money left in any envelope, it isn’t for frivolous spending. Send it to your credit card to help reduce the balance. Keep reminding yourself of your goal, to be debt free. Often times debt free equals stress free, although it may seem more stressful when you can’t spend money… think long term. Your rewards are coming.

The envelope method is just one trick to help overcome debt. In this series we hope to bring out a few more finance tidbits to help you eliminate your debt. Not all of the mentioned strategies or methods that we share will work for everyone. We only hope that as we put the information out there, some will find it useful.

Here’s a great video, that shows you some options on the envelope method for getting out of debt and paying down your credit cards.


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