How to Make a Cash Envelope System strives to provide our users with helpful information while remaining unbiased and truthful. We hold our sponsors and partners to the highest industry standards. Once vetted, those sponsors may compensate us for clicks and transactions that occur from a link within this page.

Money, finance, business concept abstract backgroundStop wasteful spending now by learning how to make a cash envelope system.

The cash envelope system is all about building discipline through budgeting. It’s perfect for those who give in to the temptation to spend too easily and want to change their habits. The basic idea is to force yourself to only use a certain amount of money for a certain category. For example, if you set a budget of $100 per paycheck for eating out, this system ensures that you only have access to $100 – no more, no less – for that category of spending.

Step 1: Evaluate your income.Step 1: Evaluate your income.

The first step of any budgeting plan is to evaluate how much money you make and how much you want to spend on what.

For the cash envelope system, budgeters often calculate income by paycheck instead of by month. This makes it easier to split up all of the money as soon as you get it. Ask yourself how much you take home every paycheck after taxes. Once you get an exact number, you can move on to step 2.


If you freelance or have other sources of income, make sure you add these into your calculations.

Estimated time: 5-10 minutes per paycheck

Step 2: Decide on a budget for every paycheck.Step 2: Decide on a budget for every paycheck.

How will you divide up your income?

Say you get a paycheck every two weeks. What are the needs you have to cover during the two weeks following your paycheck? What percentage of the check do you want to spend on groceries? Rent? Fun stuff? Come up with a use for every dollar, and don’t forget to include savings.


Always leave room for indulgences. Creating too strict of a budget means it will be easy for you to get frustrated and give up.

Estimated Time: 30 minutes – 1 hour per paycheck

Step 3: Create and label envelopes by spending category.Step 3: Create and label envelopes by spending category.

Now it’s time to create the namesake of this system: the envelopes.

Make it fun and get creative! It will make this budgeting process a lot less boring. Here’s a guide to making your own envelopes at home.

Label each envelope with the category you want to spend the money on. If it helps, add the amount as well. Then find a safe place to store the envelopes. You could use a mini accordion folder, a filing system in a safe, or any other method that will help you stay organized and keep your cash protected.


Want to teach your kids about money and have craft hour all at once? Invite your kids to help you create your envelopes. Explain what they are for and how the cash envelope system works while you DIY as a family.

Estimated Time: 1-2 hours

Step 4: Withdraw your paycheck in cash and divide into envelopes.Step 4: Withdraw your paycheck in cash and divide into envelopes.

Go to your bank and cash/withdraw your paycheck as soon as you can.

This should be the easiest part. You’ve already decided on your budget and made your envelopes for each category. Now all you have to do is divide the cash.

TIP: Double check your work when you’re done. You don’t want to accidentally overspend because you put too much cash in one envelope!

Estimated Time: 20 minutes

Step 5: Only use the amount in the envelope for its assigned cStep 5: Only use the amount in the envelope for its assigned c

Follow this rule or the whole cash envelope system falls apart.

This is why it’s imperative to be realistic when you’re deciding on your budgets for each envelope. You have to create a system you can follow. Be honest with yourself.


If you want to make the system more portable, you can buy a cash envelope system wallet that has dividers to separate your cash.

Note: You can still use the cash envelope system online.

If you don’t want to actually take cash out of the bank, you can still use this form of budgeting.

Basically, you follow all of the same steps except you use each envelope to store a list of all of your purchases and their totals for that category. You can also just use a spreadsheet. The biggest issue with using this system online is that you can still use a debit or credit card when you’re over-budget, unlike when an envelope runs out of cash.

Pros and Cons of the Cash Envelope System

This method may sound pretty foolproof, but there are some things you should consider before switching.

Pros of the Cash Envelope System

  • Knowing exactly when you’ve used up your budget
  • Paying upfront, meaning you never miss bills
  • Thinking more about how you spend your money.

Cons of the Cash Envelope System

  • Having to go to the bank and withdraw cash
  • Missing out on credit card points
  • Getting confused when categories overlap.

Think this could work for you? Try the system for yourself. You will build discipline with your money, and this can be a great method for working your way out of debt. Good luck!

How to Save Money on Groceries strives to provide our users with helpful information while remaining unbiased and truthful. We hold our sponsors and partners to the highest industry standards. Once vetted, those sponsors may compensate us for clicks and transactions that occur from a link within this page.

Follow this guide to learn how to save money on groceries to feed your family – and your finances.

You have to eat to live and you have to pay to eat. It’s a vicious, hungry cycle. If you’re wondering how to save money on groceries without losing too much of your free time, this guide can help. Shows about extreme couponing make it seem like a full-time job, but it doesn’t have to be that way. Start by getting organized and setting a realistic budget and the rest of these steps will fall into place.

how to save money on groceries

Step 1: Create a monthly budget.

Your first step is mapping out exactly how much you want to spend on groceries each month.

Don’t forget to factor in things like cleaning supplies and toiletries – groceries aren’t limited to food. offers a range of budgeting resources, so you can make a budget that works for you. The 50/30/20 budget helps you split up your income efficiently to cover your needs, wants, and savings. Tiller, a budget spreadsheet system, can also make it easier to plan out your spending.


Find a budgeting tool that minimizes the hassle of managing your money, so it’s easier to stick with planning and saving.

Add some room for indulgences into your budget. If you plan to be as bare-bones as possible, you could get frustrated and give up more easily. Rewarding yourself is a responsible part of budgeting!

Estimated Time: 1-2 hours

Step 2: Plan your shopping trips around grocery store sale schedules.

Grocery stores run on specific shipment and sale schedules that you can track.

This means that you can anticipate sales before they happen and only stock up on something when you know you’ll get the best deals. For example, every time the Super Bowl rolls around, there are great specials on frozen foods and snacks. After Thanksgiving, you can stock up on all the hearty ingredients that go on sale. Love chocolate? Post-Valentine’s Day sales will be perfect for you.


This guide from the Six Dollar Family blog explains the best times to shop for different items throughout the year.

Estimated Time: 15 minutes

Step 3: Compare prices and check out grocery store ads.

It may be more convenient to go to only one grocery store, but it can result in better prices if you shop around.

Different stores also have sales at varying times, so check out their weekly ads. Don’t forget about gas prices, though. If a store 15 miles away has slightly lower prices, the cost to get there may mean it isn’t worth it.


BeFrugal has a long list of stores with links to their weekly ads. Look for stores near you and find out what they have on sale.

Estimated time: 1-2 hours

Step 4: Find coupons for the products you want.

Online coupon sites make it especially easy to get the products you need at lower prices.

Search the web for the type of product you want followed by the word “coupon” and thousands of results will come back. Keep your eyes open for products you may need to replace soon or you’ve avoided before because of their prices. You should also take a look at our Coupon Center to find coupons that help save you extra money on things you normally purchase.


Finding coupons before you make your list helps you be more efficient about when you buy things you need. For example, you may not be out of your favorite laundry detergent yet, but a $1-off coupon that expires next week means you should buy it now for the best deal.

Estimated time: 2-3 hours

Step 5: Make a list and stick to it.

Creating a list is one of the most important steps of this guide.

Only write down what you know you will use, otherwise you could end up losing money on food you never eat. Grocery stores are designed to be tempting. It can be difficult to resist picking out unnecessary foods from those beautiful displays of new products, freshly made sweets, and expensive pre-packaged meals. Put on your grocery shopping blinders when you’re at the store and stay focused on getting only what you need.


A great way to shop and save is to invest in frozen and canned foods. They last much longer and are very versatile ingredients, not to mention they’re usually cheaper. Frozen vegetables also retain more nutrients.

Estimated time: 25 minutes

Step 5: Check the prices again at the store.

Not only should you double check the prices for the brands you have on your list, but you should also keep an eye out for comparable items at lower prices.

In addition, there could be in-store sales that you missed when doing research online and in weekly ads. This is also your chance to take advantage of stores that have price-matching programs. Some stores, including Walmart and Target, will match lower prices on qualifying products. Read more about the programs here.


At most stores, there is a section of the price sticker on the shelves that lists an item’s price per ounce. This price is a better indicator of the value of the product. For example, you may think that a $4 jar of tomato sauce is better for your budget than a $5 jar, but because of differing sizes, the $5 jar may have a better price per ounce.

Estimated Time: 1-2 hours

Step 6: Ensure that everything checks out correctly.

Grocery shopping can be exhausting, but don’t think getting to the checkout line means you can relax.

Keep an eye on every price as it’s being rung up. A sale may not register correctly or there may be price discrepancies that you were unaware of. Don’t be afraid to speak up if you think something is wrong.


Don’t forget to use any of your paper or electronic coupons!

Estimated Time: 5 minutes

Step 7: Store your groceries properly.

Learning how to properly store things is as much a part of how to save money on groceries as tracking sales.

Even if you’re a master at couponing, all that work is worth nothing if your purchases go bad in just a few days. Make your food lasts longer by reading up on how to store it the right way (and when to throw it out).


Use this guide for storing fruits and veggies, this guide for meats/seafood, and this guide for dairy products.

Estimated Time: 5-10 minutes

Bonus: Consider meal planning and meal prepping.

Planning out your meals and prepping them all at once can save you time and money.

Making a weekly menu plan for all your meals means you will know exactly how you are going to use all of your grocery store purchases. You can’t have waste if you have a plan for everything! Meal planning and prepping also enables you to be prepared for situations where you are in a rush. If you wake up late, you already have some overnight oats stashed in the fridge. If you need a quick dinner, you already have the recipe planned out and the ingredients chopped. Getting started will take some adjusting because of the time it takes to plan, but if you get used to it, it’s worth it.


The Budget Mom has a meal planning freezer challenge that can help you jump right into this money-saving hack.

How to Recession-Proof Your Finances has the ultimate guide for recession-day preppers worried about the potential for Recession 2019.

Recession-proof your finances so you can make it through the next financial storm
Never heard of “recession-day preppers”? It’s a new term the team coined to refer to people who envision another financial meltdown just over the horizon. It’s the money version of a doomsday prepper. And like doomsday prepping, recession-day prepping only sounds crazy until the next recession hits… which it inevitably will.

Whether you believe in the possibility of Recession 2019 or not, it’s a good idea to shore up your budget. If the worst happens, you’ll be glad you reinforced your finances to weather the storm. You can be the dependable, financially stable ant in a weak economy full of consumerist grasshoppers who failed to plan.

The guiding recession-proof principle: Savings good, debt bad

If you want to recession-proof your budget, your actions will revolve around two tasks:

  1. Reduce your debt
  2. Increase your savings

Less debt means less risk of default and more borrowing power in case you need it. More savings provides a bigger safety net if you encounter any issues with your income and cash flow. Recessions bring higher unemployment, increased risk of layoffs, and lower tips and commissions. In the last recession, full-time employees even had their hours cut, often to 4-day work weeks. So, you need extra savings to pad your financial safety net.

Step 1: Systematically minimize debt levels

Pay off credit card debt first

Start by eliminating high interest rate credit card debt first. Ideally, you want to maintain zero balances from month to month. So, everything you charge in a month gets paid off within that billing cycle. This not only minimizes interest charges but also helps protect your finances from risk during a recession.

If a recession hits, you don’t want excess credit card debt hanging around. It gives you less breathing room in your budget because you have more obligations to cover. If the worst happens and you lose your job, credit cards are often the first debts to slip into default.

That means if you believe a recession may hit in 2019, you should take steps now to eliminate credit card debt. If you can’t pay off balances using a debt reduction plan in your budget, consider relief options:

  1. Credit card balance transfer
  2. Unsecured personal debt consolidation loan
  3. Debt management program

Then focus on student loans

Once you have credit card debt out of the way, focus on any student loan debt in your household. If you have multiple federal loans to repay, consider a federal repayment plan. There are two plans (standard and graduated) that are designed to help you pay off student loan debt “quickly.” However, the term on these programs is ten years, so it’s not exactly fast. It’s just faster than other relief programs that have terms of up to 25 years.

If you really want fast student loan repayment and you have a good, steady income, the best option is student loan refinancing. You can use refinancing for federal and private student loans. This will give you the shortest term so you can really get out of student loan debt fast. However, just be aware that this converts federal loans to a private loan. You will no longer be eligible for federal student loan relief. If the recession hits and you lose your job, that could be a problem. So, consider this carefully before you take this step.

Need help weighing your options to get out of student loan debt? Talk to a student loan resolution specialist for a free evaluation to find the best solution for your needs.

Get Help Now

Finally, be careful with risky auto loans

While some experts believe student loans will be the debt at the root of the next recession, others worry it will be auto loans. Many of the risky lending practices that caused the housing crisis in 2008 have migrated to the auto industry.

  • If the economy takes a turn and you have a long-term auto loan (6 years or more), you may end up stuck with a loan you can’t afford and a car you can’t sell.
  • If you have a variable rate loan, you also need to be concerned. Rates could increase suddenly just like they did on adjustable-rate mortgages at the start of the 2008 crisis.

If you’re in either of these situations with an auto loan, refinance now. Your best bet is to get the debt paid off in case the auto loan bubble really does burst.

Step 2: Increase the size of your financial safety net

In normal circumstances, experts say you should have 3-6 months of bills and budgeted expenses covered in savings. For example, let’s say your bills and necessary expenses cost $1,500 per month. A good emergency savings fund would be $4,500 to $9,000. This would allow you to maintain your budget without credit even if you lose your job for up to six months.

However, during a recession, 6 months may not be enough. During the Great Recession, people were unemployed for up to a year or more, on average. So, experts now say that if you anticipate a recession, you should save up to 1 year of expenses. Ideally, you want $18,000 in easily accessible savings accounts.

If that sounds excessive, just remember what this money is supposed to cover. The idea is that you can live on savings until you get a new job if you get laid off. No massive run-up of credit card debt; no payday loans with ridiculous interest rates. You enjoy financial peace of mind even without full-time employment.

What are the best savings accounts for a recession?

The best savings account to have during a recession is a fixed-rate savings account that you open now. Over the past two years, the Federal Reserve has increased the federal funds rate about seven times. That’s the benchmark rate that financial institutions use to set base rates for loans and savings accounts. So, interest rates on loans are on the rise, but so are rates on savings accounts. You can find savings accounts right now that offer a 2% Annual Percent Yield (APY); that’s the interest rate on a savings tool.

If the economy takes a turn, the Federal Reserve will lower the federal funds rate. The idea is to encourage people to borrow to spur the economy. But that will also drop the APY you can find on savings tools. That’s why you want to get a fixed-rate savings account now. Get the account while rates are at their highest.

Also, be aware that if you have a variable-rate savings account, such as a Money Market Account, your growth will likely slow during the recession. The high rates you may be enjoying now won’t last if the economy takes are turn. That’s why fixed-rate accounts are your best option heading into a potentially weak economy.

3 key takeaways from the Great Recession as you recession-proof your finances now

#1: If you think there’s a chance of recession, don’t do anything risky with your mortgage

Arguably the most devastating part of the Great Recession was the real estate market collapse. It was certainly heart-breaking to watch people lose their 401(k) savings in the stock market crash, but most eventually recovered. But when the mortgage market collapsed, families lost their homes and in many cases, there was no going back.

A large part of the mortgage crisis resulted from excessive borrowing against equity. People took advantage of the boom years to take out second and even third mortgages. They used home equity loans and HELOCs without reserve or concern. But when the market collapsed and property values plummeted, those homeowners were severely upside-down. They owed far more than their homes were worth.

The hard lesson learned during the crisis was that borrowing against your home can be risky. Just because you have equity to use, it doesn’t mean that you should. If you worry about a recession, stick to a single traditional mortgage and don’t borrow against your home. In particular, avoid actions like taking out a home equity loan to pay off credit card debt. It’s just not worth the risk!

#2: No job is 100% recession-proof, but some are recession-susceptible

There’s no guarantee that you can make it through a recession without hiccups in your employment. However, the Great Recession certainly showed the vulnu7erability of several professions:

  1. Anything in construction or real estate can be risky. Recessions don’t always come with a mortgage crisis, but a weak economy often leads to a housing market slowdown. If your career is dependent on an active health real estate market, you may want to consider supplementing your income.
  2. Hospitality is hard when everyone stays home. People in the service industry also suffered particularly hard during the Great Recession. As families felt the financial pinch, they stopped going out to eat and limited vacations. As a result, tips dried up and people’s customer base just wasn’t there.
  3. Startup businesses have a higher risk of closure. You don’t have any guarantee that a large company will weather the storm and avoid mass layoffs. On the other hand, working for a startup means you may be more at risk of the business closing entirely.

#3: Loan approvals can be hard to come by during a recession

Lenders can choose to increase or relax their lending standards, as long as they follow federal and state regulations. During a recession, lenders face high rates of default from other borrowers. Basically, they can’t afford another bad loan that doesn’t get repaid.

This means it can be tough to get approved for financing. This is true both of for personal loans and for any small business loans that you may need. If you want to get approved, you’ll need a great credit score and a low debt-to-income ratio. Only the most creditworthy can get approved.

That being said, recessions can often be a great time to refinance. The Federal Reserve typically lowers interest rates during a recession to stimulate the economy. If you have great credit and you followed the advice above, you can get really attractive rates on loans. Just make sure you have the means you cover the payments on whatever you borrow.

Ask The Expert: How Can I Avoid Overdraft Fees? strives to provide our users with helpful information while remaining unbiased and truthful. We hold our sponsors and partners to the highest industry standards. Once vetted, those sponsors may compensate us for clicks and transactions that occur from a link within this page.

Question: I just started to budget a few months ago, after reading articles and blogs. I’m in debt, and I’m working on that. I have no credit cards due to poor credit management, and I have a small savings account that I can only put $10 a month into.

My main concern is using my overdraft protection funds to cover my bills. I get paid twice a month on the last day of the month, and the 15th of the month. (If that date falls on the weekends, I get paid the day before.)

After figuring out all my expenses for the month, I’m in the negative. I split up my bills between the two paychecks. I have two automatic payments that come out on the 30th of the month. This causes my account to go into overdrafts ($28 fee per item).

So when my direct deposit comes in, it deducts what I owe and leaves me short on funds for paying rent or car insurance — unless my overdraft kicks in again. This is a constant struggle on my part.

Sometimes my overdraft will be a little over $100. The next payday it will be over $300. I have my budget to the bare bone and I’m still coming up short. Any suggestions?

— Josephine in Alabama

How To Never Pay An Overdraft Fee Again

How can I avoid overdraft fees? A reader is hit with these fees every month because she can’t make ends meet. When I council smart people who are constantly being hit with overdraft fees, I know it’s a symptom of a much bigger problem.

These people aren’t lazy, they aren’t forgettnig to check their bounces. No, they’re just like Josephine, good people buried under bad debt. It might seem weird that when I hear about constant overdraft fees I may start thinking about bankruptcy.

Bankruptcy is a last-ditch maneuver towards financial freedom. But based on what Josephine has told me so far bankruptcy may be an option. It sounds scary and it’s a last resort, but it’s not a death sentence.

I urge you to read’s report the pros and cons of bankruptcy. I also mentioned bankruptcy because Josephine is just the kind of person it’s designed for, she provided me with a detailed list of her finances which she meticulously maintains.

She’s obviously the kind of person who will spend and save responsibly. If she can just get back to zero. If you have an issue like Josephine’s please call

Howard Dvorkin answers…

Using overdraft protection to juggle debt is like drinking poison because you’re thirsty – but then you drink the antidote right after. Eventually, this process takes its toll.

Better to solve the original problem.

I can understand why you feel you have no other choice, Josephine. When you’re struggling week to week, it’s hard to step back and look at the big picture. That’s what credit counseling is for.

A certified credit counselor will give a free debt analysis, reviewing your entire financial picture to see what programs exist to help you out. Based on the details you’ve provided, this might sound like an odd thing to say, but: I believe you’re going to be just fine.

How can I say that when your numbers don’t add up? I’m simply impressed that you’ve crunched all those numbers. You’d be surprised, Josephine, how many Americans have no clue what their income is, much less their debts.

The first step to solving a financial problem is quantifying it, and you’ve done that. When you speak with a credit counselor, that phone call will be so much more productive because the data is right at your fingertips.

Based on what you’ve told me so far, bankruptcy may be an option. That sounds scary, and it’s a last resort, but it’s not a death sentence. I’d urge you to read’s report, The Pros and Cons of Bankruptcy.

I’ve been asked about bankruptcy many times, from questions like Is It Possible To Get Credit Cards After Bankruptcy? (yes) to Will Bankruptcy Keep Me From Buying A Car? (no, but it will cost more to get an auto loan). I’ve even been asked Can I Declare Bankruptcy Twice?

While a credit counselor often spends a lot of time just trying to understand the contours of someone’s debt, in your case, the conversation can focus on the best solutions. If that’s bankruptcy, then I expect you’re just the kind of person that last-ditch option was designed for: Someone who will appreciate the clean slate, and will prosper in the future.

If you don’t call, Josephine, call someone who can get you the help you need. You’re a success story waiting to happen.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Do I Stop Living Paycheck to Paycheck?

Question: I don’t have a lot of debt, but I also don’t have a lot of money. I think I got $5,000 I’m carrying on a couple of credit cards. I also got $12,000 in student loans to go. My car is paid for, and I live at home with my parents until I can figure out how to live on my own. My job is steady, and it has decent benefits, but it pays only $22,000 a year. How do I save money and stop living paycheck to paycheck?

— Anthony in Georgia

How Do I Stop Living Paycheck to Paycheck

How do I stop living paycheck to paycheck? A reader has some debt but no savings. Thankfully he has several excellent options. If you feel like your financial life is a hamster wheel it’s time to stop running in circles.

The best way to stop living paycheck to paycheck is start living dollar to dollar. The best thing you can do is also the easiest. can show you how to create a budget that will show you exactly where your money goes. The results will probably surprise you.

Yes, I know making a budget isn’t high on anyone’s list of having fun, but it’s also very important. It also doesn’t take too long, so do it now, can show you how. Once you create a budget you can consult a professional. It’s called credit counseling and believe it or not it’s absolutely free.

A certified credit counselor will review your finances with you once completed. You’ll have a clearer idea of what you can do to stop living paycheck to paycheck.

It might include signing up for programs that can reduce your student loan payments or other programs that can manage your credit card debt but you won’t know about that until you know about yourself first.

So, make that budget!

Howard Dvorkin answers…

First of all, allow me to reminisce for a moment. Back when I began my career as a financial counselor in the 1990s, $5,000 was considered a significant credit card balance, and $12,000 in student loan debt was still a rarity.

Times have certainly changed. The average credit card debt by household in this country is more than $16,000, reports. The average student loan debt is more than $50,000.

So according to these statistics, you’re right, Anthony. You don’t have “a lot of debt.” However, as you’re learning, any debt is a drag — not only on your current financial situation, but you’re future one, too.

Even worse, when you earn very little, the interest rates on your debts chew up a bigger percentage of your income. So the first step is curtailing some of those interest rates.

To accomplish that, try these three options and in this order…

1. Make a budget and stay within it

Anthony, you say you think you have $5,000 of credit card debt. You need to know. The best way to do that: Create a budget. Yes, it’s as boring as it sounds. It’s also as important as it sounds. Read How to Create a Budget and Stick to it.

2. Cut what you can

Now that you know what you bring in and where it all goes, you can intelligently look for ways to save. Shaving a few dollars off a workweek worth of coffee doesn’t seem like much, but once you have a budget and can note how it adds up, you’ll be motivated to do more. It’s akin to dieting: Every calorie counts.

3. Get a professional assessment

If you’ve read before, you know I’m a huge proponent of credit counseling — and why not? It’s free. A certified credit counselor calls you and conducts a financial assessment right on the phone. From there, you can make informed decisions about your finances. Learn more about free credit counseling services.

These three options are just the beginning, Anthony. If you start here, you’ll quickly learn advanced techniques that will save you even more — like how to reduce your student loan payments. First things first, however. Start here, do well, and I can promise you that financial freedom is attainable.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Can I Convince My Boyfriend To Buy Fewer Gifts This Holiday Season?

Question: My boyfriend is driving me crazy. He agreed that we would both tighten our belts so we can save to get married and get a house and start a family. For the most part, he has been good about this. Then the holidays roll around. 

He believes you need to spend a lot of money on gifts for everyone. When I remind him of our plans, he says, “But these are our friends and our families, I’m not going to be a Scrooge to the ones I love most!”

He also says it’s no big deal to run up our credit cards, because we can make the minimum payments, as little as $15 or $25 a month. If it gets really bad, he says we can sign up for programs that will cut our monthly payments by half. And if THAT fails, we can declare bankruptcy and just start over with a clean slate.

I know he’s full of it, but I don’t have the facts to explain it to him. Can you? He’s a good man the rest of the year, but the holidays might actually break us up.

— Katrina in Michigan

Howard Dvorkin answers…

The holidays are marketed as a time for families to come together. Sadly, I’ve seen them rip families apart — precisely for the reasons you just described, Katrina.

Your boyfriend proves that a little financial knowledge can be a dangerous way to live. Let me give you the facts…

Minimum payments equal maximum cost

For Halloween, compiled an interactive map called Credit Hell. It shows you just how long it takes to pay off the average credit card balance if you only make minimum payments, and it’s broken down by state. For Michigan, it would take 16 years and four months — and in 35 other states, it takes longer.

When you make minimum payments, you rack up huge interest charges. Sure, you don’t have to pay up right now. You will pay even more later.

DMPs are effective but not easy

When your boyfriend mentioned cutting his monthly credit card payments in half, he was most likely referring to a debt management program. Called a DMP for short, these are administered by nonprofit credit counseling agencies and can reduce your payments by 30 to 50 percent. They’re powerful tools, but they’re not panaceas.

I suggest you consult the report, Debt Management Program Pros and Cons. One big con: You can’t open any new credit cards while you’re enrolled in a DMP. That makes sense, because credit card spending is what got you into trouble in the first place, but there are similar restrictions you need to know about.

Bankruptcy is serious business

Likewise, I suggest you read — or insist your boyfriend read — The Pros and Cons of Bankruptcy. From student loans (which aren’t discharged) to your credit score (which will take a hit), bankruptcy is a last resort. Thinking of it as an easy way out is like driving your car recklessly because, “Hey, I have airbags to protect me if I crash!”

 If none of this sways your boyfriend, Katrina, I have one idea that’s been known to work wonders: Talk to his parents. I bet you they’d be horrified by his approach to holiday spending, and they’ll be the first to tell him: We love you, not what you buy us. Take us to a movie or a reasonable dinner, and we’ll be happy.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How to Make a Holiday Budget

Craft a holiday spending plan that helps you avoid overspending that leads to credit card debt.

[On-screen text] How to Budget for the Holidays

The winter holidays are a wonderful time of year, but they’re also a time when people get into debt. With so many expenses, including gifts and big family dinners, it can be easy to turn to credit to get by.

You put things on your credit card with the idea that you’ll deal with the debt once the festivities are over. Then you wind up reeling in the aftermath, looking at all credit card debt you have to pay off. This is called a holiday debt hangover and it can be a nightmare to handle in the New Year.

If you want to avoid it, you have to plan ahead. The earlier you can start putting a plan together and getting it into action, the better. This gives you time to be smart and shop for the best deals, so you can spread out the cost over several months. And this is how you avoid amassing large volumes of debt in the last few months of the year.

Start by making a budget for all your holiday expenses. This includes not only a list of gifts, but also things like decorations, shipping and postal charges for cards, family meals, and flights and accommodations, if you’ll be travelling.

The more detailed you can be in outlining all of the expenses you’ll face, the more you can plan ahead. With the right strategy, you can get through the holidays debt free and start the year on the right foot. Don’t forget to download our holiday money guide to have your best season yet.

If you’re struggling with debt or have other financial issues, give us all call to see if we can help. We’re A+ rated by the Better Business Bureau and have helped thousands of people become financially stable. When life happens, we’re here for you!

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Use’s Holiday Money Guide to make a practical, effective holiday budget that lets you spread holiday cheer without causing overspending that leads to credit card debt.

Download our Holiday Guide!

The winter holidays are the most expensive time of year for most Americans. Retail estimates show shoppers will spend $678-$682 billion between November and December of this year. Experts predict that the average household will shell out about $967 to make the season merry and bright.

Give yourself the gift of extra cash under the tree with a smart holiday budget
Considering that most Americans say that they don’t have the savings to cover a $500 emergency expense, it doesn’t bode well holiday debt. Fortunately for you, is here with the top tips for crafting an effective and frugal holiday budget. Use the tips you find below to make your holiday spending plan. And if you still run into trouble with credit card debt this year, call in the New Year to make a plan to pay it off fast.

How to make a holiday budget step by step

  • First, write down everyone that you think you need to buy a gift for; if you know what you want to buy for that person list that, too.
    • Make sure to include everyone on your list, including:
      • immediate family
      • extended family
      • neighbors
      • bosses and co-workers
      • friends
      • kids’ teachers
  • Next divide that gift list into two categories: (1) people who need more expensive unique gifts and (2) people who can receive less expensive universal items or handmade gifts
  • For the second group, set a dollar limit on what you want to spend per person.
  • Within your family, also decide if you want to set dollar spending limits for each other; this keeps you from going overboard on gifts for the immediate family.
  • Now add in all your other holiday costs, including expenses:
    • Decorations
    • Food
    • Travel
    • Entertaining
    • Postage and Shipping
    • End of Year Tipping
    • Charitable Donations
  • Put all of this into spending planner worksheet or spreadsheet with two columns for each holiday expense:
    • Planned Spending
    • Actual Spending
  • Total up Planned Spending to see how much you’ll spend over the season, in total.
    • Compare this to the cash you have available for holiday spending
    • If it’s too high, adjust your list to cut back or limit gift items
  • Once your list is ready, don’t shop without it; use the money-saving tips below to help ensure you stay on budget.
  • As you spend money over the holiday shopping season, be sure to note what you actually spent on each item.
  • That way, if you start to go over-budget, you can cut some items off your list and stop spending!

Holiday spending tips

These tips can help you stick to your holiday spending plan:

  • Always shop with your list. This way, you can ensure you stick to the spending plan that you made. These days, keeping your list on your smartphone can be an easy way to ensure it stays with you. You can even in share it in your family cloud, so anyone can check something off if they buy it. Also have your list with you when you shop online.
  • Only take cash with you when you shop. Shopping with cash helps you avoid overspending and impulse purchases. You can only spend the money you have, so those holiday store displays don’t tempt you into spending on things you don’t need.
  • Consider using PayPal or prepaid credit. With so much online shopping, the holidays are a prime time for identity theft. Although credit cards limit theft liability to $50, giving a cyber thief access to your high-limit card can end up being a hassle to dispute. Debit cards are even worse, because liability limitations depend on when you notice and report the theft; if it’s reported after 60 days, there’s no liability limit.
  • At most, you should use 1-3 credit cards for holiday spending. This includes one low-APR credit card for most purchases. Then you can strategically use travel or rewards credit cards, as needed. We explain this more below.

Ways to trim down gift costs

You can also improve your holiday budget by trimming down gift costs. Either reduce the number of people on your list or cut costs per person:

  • Set up gift swaps and exchanges. Instead of buying unique gifts among groups of adults, set up a Yankee Gift Swap or White Elephant Exchange. Each person buys a gift under a certain dollar limit, then you have a party where everyone opens and swaps the gifts out.
  • Don’t buy gifts for yourself or your pets. If you want something, it should be on your list for someone else to buy it for you. People now waste up over $100 each Christmas self-gifting; also, don’t buy for your pets – they have no idea it’s a holiday, nor do they care.
  • Buy in bulk or build gift baskets. For non-immediate family, there’s no need for unique gifts; either buy general, universal items that you can get cheaply at bulk discount stores or get drafty and make gift baskets filled with holiday items or baked goods.
  • Get the kids crafting. Handmade and homemade gifts are good for grandparents, teachers and neighbors. Just make sure to start crafting early so you have time to learn from mistakes.
  • Play Secret Santa or let your kids do it. This is where you do chores or other acts of kindness while someone is away from their home. You can mow lawns, pick up leaves, wash cars or shovel driveways, depending on the weather where you live. Kids can get really into doing chores for others when you make it a game.
  • Give actions instead of things. Gift your significant other a coupon book of dates or time together; give your grandchild a coupon book of fun outings. Or give of yourself through actions, like babysitting for a stressed mom.

Holiday decorating ideas on a budget

If you love to decorate for the holidays, it’s all too easy to overspend. So, how do you deck the halls without putting a serious dent in your wallet? Use these tips:

  • A fake tree is more cost effective. The cost of getting a real tree is something you incur annually. If you get a fake tree, you can usually get it for about the same price or less; then you can use it year after year.
  • Replace lights instead of strings. Let’s be honest, going through a light string to find the dud can be tedious, but it’s also basically free if you use the replacement lights that came with your string. Even if you need to buy replacements, it’s still cheaper.
  • Set up a decoration swap with friends or family. Inflatables and other yard art are one of the biggest expenses in holiday decorating. Set up a decoration swap among your friends or family to trade out holiday decorations. That way, everyone’s house looks new without anyone incurring new expenses. Just be sure to agree, in advance, what to do if something gets damaged.
  • Revitalize decorations that are worn out. Say you bought some glittery outdoor gift boxes that light up, as well as some outdoor ornaments for your trees. These types of decorations start to look worn and dingy after a few years. Instead of buying new decorations, get some glue and glitter and go to town to make those old decoration pop again.
  • Get crafty. Making decorations like ornaments at home is fun and a great project if you have kids. You can buy supplies and get a lot of decorative details for your house for the cost of one pricey piece of tchotchke from a store.

Planning a holiday party on a budget

Another time when overspending occurs easily during the holiday season is for holiday parties. Between decorations, party supplies, food and beverages, things can get pricey quickly. That’s especially true if you try and offer a full bar.

  • Potluck is cost effective and easier on you. Instead of trying to cook 12 different hors d’oeuvres yourself or (even worse) an 8-course sit down meal yourself, make the party potluck. Everyone brings their favorite holiday dish or winter comfort food to share. It limits your expenses and keeps you from spending the whole day in the kitchen.
  • BYOB or at least BYOA. Alcohol is usually the biggest expense, especially if try to offer a full bar for cocktails. Instead of getting a dozen bottles yourself, ask guests to bring the alcohol they want. Then you can provide mixers and non-alcoholic beverages.
  • Buy in bulk. This is particularly good for those non-alcoholic beverages you need and other items that can be used later if they aren’t used up during the party.
  • Holiday parties are perfect for gift swaps. And you don’t have to set a high dollar limit to make this fun at a party. If everyone buys the dumbest thing they can find for $10-15, you can have a lot of fun with a White Elephant Exchange of your weird gifts.
  • Find cheap games to play online. Don’t waste money on adult party games. Most of these can be recreated with simple supplies you have around your house. Just Google “free party games” and go to town.
  • Decorate at the dollar store. If you aren’t satisfied with your regular home holiday decorations for the party, don’t go crazy with expensive home décor retailers. Instead, hit the dollar store and deck your halls on the cheap.

Christmas on Credit:’s Best Holiday Credit Card Tips

Putting Christmas on credit can get costly with interest charges
Let’s be honest: Most people depend on credit cards to cover at least some of their holiday expenses. But if you use credit during the holidays, then you need a game plan to minimize debt and maximize rewards. Follow these tips to develop the best holiday credit card strategy:

  • First, any cards that you plan to use for holiday shopping should start with a zero balance.
    • This way, if you pay off the charges within the first billing cycle, you make those purchases interest-free.
    • No interest charges ensure you get the most out of any rewards you earn.
  • Next, you should assign cards for specific parts of your holiday spending plan
    • If you have a rewards card that offers bigger bonuses for shopping at certain places, limit card uses accordingly.
    • If you have a travel credit card, use it to make your reservations and accommodations to earn miles.
    • Only use store credit cards if they offer rewards AND if you can pay off the balance in-full.
  • Everything else should go on your credit card with the lowest APR.
    • This minimizes interest charges, so you pay less money as you work your way out of debt.
  • Then, when the bills come in, pay off the rewards, store and travel credit cards in-full; make the minimum payment on the low APR card.
  • Once the other balances are gone, pay off the low-APR balance in the biggest chunks possible on your budget.

Christmas on Credit: Card Use

Card typeBest used forRepayment plan
Low APR credit cardUse for big-ticket purchases that can’t be paid off within a single billing cycleMinimum payments while you focus on your other card, then pay it off in chunks
Rewards credit card (cash back or points)Limit use to what you can pay off within 1 billing cycle; start with a zero balance to eliminate interest chargesStart and end the billing cycle with a zero balance to use the card interest-free
Travel rewards credit cardUse for airline reservations and hotel accommodations to earn milesPay off quickly to avoid offsetting value of miles earned with interest charges
Store credit cardsAvoid use unless the card offers incentives without time limitsAlways pay off store balances quickly, since these cards tend to have the highest APR

Why not put everything on rewards?

Putting all your holiday expenses on rewards credit cards is rarely an effective strategy. Remember, retail experts predict the average family spends close to $1,000 during the holidays. Most people don’t have $1,000 sitting around to pay off that full cost all at once; if you did, you would’ve paid for Christmas in cash instead of using credit.

Rewards that you earn are quickly offset by the high interest charges that come with most rewards credit cards. Even with excellent credit, the average APR on a rewards credit card is over 16% APR. At that rate, interest charges quickly offset any rewards you earn. That only takes 1-2 billing cycles.

For example, let’s say you put $1,000 on a cash back credit card at 16% APR. You earn 3% cash back on the purchases. The minimum payment schedule is a standard 2% of your balance.

  • With 3% cash back, you earn $30 on your holiday purchases
  • The minimum payment is $20
  • However, over $13 of that payment goes to cover accrued monthly interest charges
  • So, within 3 payments (just over 2, actually), you completely negate your cash back earning with interest charges.

This is why you should use rewards cards strategically in order to avoid interest charges. Otherwise, you really don’t “earn” anything.

Be careful with store credit cards

These cards tend to have relatively high interest rates even compared to other credit cards. It’s rare to see a store credit card that has APR less than 20%; many go much higher than that. They may also have stricter terms on repayment.

So, unless you’re earning good rewards AND you can pay off the balance in-full within the billing cycle the charges were incurred, steer clear! For the record, earning limited-time bonus cash to use in the store is usually not a good enough perk. The last thing you need in January is a push to spend more money while you pay off your debt.

When Is It OK To Cash In My Retirement To Remodel My Home? strives to provide our users with helpful information while remaining unbiased and truthful. We hold our sponsors and partners to the highest industry standards. Once vetted, those sponsors may compensate us for clicks and transactions that occur from a link within this page.

Question: Should we roll over our 401K to an IRA to use this asset to pay for remodeling our home?

— Gayle in Texas

Steve Rhode answers…

Gayle, it is amazing how such a simple question can have such big consequences. There are some basic issues worth considering before you launch into this obvious plan of action.

For example, your 401(k) is most likely protected from your creditors right now. But if you roll it into an IRA with commingled money, you can risk losing it all if you were unexpectedly sued.

And these suits are totally unpredictable. All it takes is a bad accident you could be blamed for — and poof, there potentially goes your retirement. I’d make sure you consult with an attorney who is licensed in your state to best understand how any rollover might expose you to a loss in this situation.

Then there’s this: If this is a company 401(k), you will lose the ability to access the funds at an earlier age without a tax penalty.

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What I am assuming from your question is you want to borrow against your IRA or use some money from this exchange to help fund your remodel. It’s your money, and you can do whatever you want with it, include lose as much as you want.

My primary issue with the access of retirement funds like a 401(k) or IRA is the loss of return. People get distracted and think they are borrowing their own money at a low-interest rate like 5 percent. But what most miss is that a 5 percent loan is really costing you 20 percent in good return years. And right now, we’re in a span of good return years.

During the time that the money you’ve borrowed is out of your retirement account, it is now growing with the rest of your funds and bringing down the entire value of what your retirement funds would have been.

So borrowed remodel funds can now wind up costing you a lot just when you need it most.  For example, using this online retirement fund loan calculator from Bankrate.

You can see that a $30,000 loan from your retirement funds — 401(k) or IRA — will cost you $78,091 in repayment and lost growth on the funds while they were borrowed. If something comes up and you can’t repay it in time, then the lost value can be as much as $1,138,148.

Yes, that’s more than $1 million.

I guess you could label me as a financial libertarian because I believe people need the facts and they are entitled to make their own wrong choices. Ultimately, the question is not if you can do this, but if you should do it. Only you can make that choice. Good luck.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

We Might Win $100,000. What Should We Do With It?

Question: My husband is now part of a class-action lawsuit. It looks like he’ll win around $100,000. He wants to use it to buy a $92,000 condo near us and then spend $8,000 fixing it up so we can rent it.

He says this way, we can make much more than $100,000. I want to use the money to pay off our mortgage and maybe even our credit cards, since we have around $10,000, I think, on five or six cards.

My husband says this is short-sighted, and that every rich person has debt, and that wealth is simply juggling your debts. We’re at loggerheads. What do you think? 

— Marilyn in Lousiana

Howard Dvorkin CPA answers…

If you really want to know what I think, Marilyn, here it is. You both need to take a deep breath and consider what you’re proposing.

Here are the troubling signs I see from your email…

  • Lawsuit settlements are often taxable. This being taxes, it get complicated. For instance, if the settlement includes money for “pain and suffering,” that’s not usually taxed because the IRS might consider it a reimbursement for your injuries. However, the point is: You need to ask before you count on the money.
  • Lawsuits are rarely slam dunks. Right up to the end, not only can the verdict change, but so can the terms. I’m concerned that you might be counting your settlement before it’s sealed.
  • Credit card debt is one figure you can know for sure. You say you “think” you’re carrying $10,000 on “five or six” credit cards. Before you decide what to do with new money, you need to be sure what’s happened to your old money — right down to the penny.

For the purposes of illustration and education, let’s assume you get a cool $100,000.  If the condo costs $92,000, I’m assuming your husband hasn’t factored in closing costs, insurance, and other expenses. Just selling a home can add $15,000 in hidden fees. Even if buying this condo is half that, you’re already over budget if you need to make $8,000 in renovations.

Now let’s turn to paying down your existing mortgage. You don’t mention what your interest rate is, but let’s assume it’s 5 percent. You also don’t mention what the interest rates are on your credit cards, but the national average right now is hovering around 15 percent.

I’m sure you see where I’m going with this. Paying off your credit cards will save you around 10 percent more than paying off your mortgage. If you really want to know what I think, Marilyn, I suggest paying off your credit cards with whatever money you may be awarded.

Next, I’d make sure I had at least three months of living expenses in an emergency fund. If hurricanes Harvey and Irma have taught us anything, it’s that a natural disaster can cost a lot of money.

Finally, with whatever settlement money is left, I would look at other debts I have: an auto loan, student loans, personal loans. These I would pay off from highest interest rate to lowest. Finally, I might indeed pay down some of the mortgage.

Whatever you do, Marilyn, I urge you to gather facts and make dispassionate decisions with your husband. Facts like I’ve outlined here can help avoid a fight over this windfall — if it becomes a reality.

Even if it doesn’t, you can use this experience to still do the things I’ve outlined here.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Can I Pay Off My Debt Without Eating Ramen Noodles Forever?

Question: For the past year, I’ve been spending all of my extra monthly income on paying off my credit cards and student loans – but to be honest – it’s leading to a lower quality of life.  I’m just not allowing my self to spend money on those little things like the movies and going to dinner with friends.  How can I be smart and pay off my debt, but not live in a “Netflix and chill” only bubble? I don’t want to eat ramen noodles for the rest of my life.

— David in Florida

Howard Dvorkin CPA answers…

This is one of the most common and troubling questions I hear. It pains me, because Americans who really want to get out of debt are fast becoming a rarity. As I’ve written before, being in debt is becoming a terrible new normal.

An exasperated woman once asked me, “How can I pay off my debt when I have no money — which is why I got into debt in the first place? Is there any bigger catch-22?”

I don’t know if there’s a bigger catch-22, but I know of few more pervasive and painful. Fortunately, there are seven concrete steps you can do. None involve ramen noodles.

Is credit card debt keeping you from success? Learn how to get your debt under control.

Find a Solution

1. Pay what you can, smarter

If you’re making monthly payments on several credit cards, don’t make the mistake of making minimum payments equally to each card. You either want to pay off the card with the highest APR, or the card with the lowest balance. Learn more: Credit Card Debt Reduction Plans.

2. Ask and you shall reprieve

This sounds too easy to be true, but you can simply call your credit card company and ask for a lower interest rate. Why would they do this? Because they might not want to lose a good customer. Like anything else, there’s a right and proper way to ask. Learn how by reading Credit Card Interest Rate Negotiation.

3. Move your debts

Some credit cards offer a zero-percent introductory interest rate, and they let you transfer your current high-interest debt. Why? Because, sadly, they know most folks won’t pay off their debts by the time the introductory period (up to 18 months) ends. If you do it right, however you can save thousands. Here’s how: Credit Card Debt Transfer for DIY Consolidation.

4. Condense your debts

In some cases, it makes sense to take out a loan to consolidate all your debts into one monthly payment that’s lower than all the little payments you’ve been making. It’s relatively easy if it makes sense for your financial situation, but of course, it’s a tad complicated to figure out if it’s indeed right for you. That’s why you first need to read the Credit Card Debt Consolidation Loan Guide.

5. Consult an expert

Of the options on this list, my favorite is surely this one: credit counseling. There might be no such thing as a free lunch, but there is such a thing as a free debt analysis from a certified credit counselor. Many people don’t pursue this because they don’t believe it. I urge you to read Credit Counseling: Certified Credit Card Debt Help and become a believer.

6. Learn about DMPs

That’s short for debt management program. Unlike credit counseling, you’ll pay a small fee, but in exchange, you’ll reduce your total monthly payments by 30 to 50 percent. These programs have been around for decades and have helped millions. Check out the Debt Management Program Guide.

7. Settle for less

Finally, you can simply settle your debts for less than you owe, sometimes even half. This is the most complicated option, and not one you should entertain frivolously. Read the details here: Credit Card Debt Settlement Programs.

I don’t know which option to pay off your debt is best for you, David. In fact, more than one might be best. However, I don’t know how much you owe, at what interest rates, how much you earn, what your must-pay bills are, and if you have other debts like a car payment or mortgage.

These are the questions you’ll be asked if you pursue a free debt analysis with a credit counseling agency. I’d suggest you do that first. The sooner you do, the sooner you can replace ramen with steak!

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