This is typically done using an envelope system, which was popularized by Dave Ramsey. I had so many envelopes, ones for mortgage payments. I read about cash envelopes & dived in only to fail very fast. Hear Dave Ramsey's syndicated advice radio show from 6-8 a.m. One of the most popular approaches to budgeting is the cash budget. So a few years back I discovered Dave Ramsey. I invest my Roth IRA money in mutual funds that have a solid track record of outperforming the S&P 500 for 10 years or longer.ĭave Ramsey is a money management expert, radio host and best-selling author. You came here for a cash envelope tutorial, didnt you Part of Dave Ramseys system is to pay cash for everything. So yes, I would sell that stock and use the money to fund a Roth IRA or multiple Roth IRAs. I wouldn’t advise having the majority of your wealth - the highest percentage of your net worth - tied up in one single company. Now, would you buy the stock if you had $10,000 sitting on the table? Most people, myself included, would say no because there’s too much risk. You didn’t mention an amount, but let’s say you’ve got $10,000 in that company’s stock. It was very kind of your grandparents to buy you a gift like this, but I think you can do better. You would cash it out and use the money to establish a Roth IRA. The idea behind the cash envelope system is to budget your money into categories and keep yourself from spending frivolously. Would be a good idea to cash out the stock and roll it into an IRA? - Dylanĭear Dylan: Technically, you wouldn’t be rolling it into an IRA. The Idea Behind the Cash Stuffing Envelopes This idea originally came from Dave Ramsey and has helped millions of people save money and divide up their available funds to go to the correct place. Just make sure you don’t get crazy and blow that money on something outside the intended category, or on stuff you really don’t need.ĭear Dave: I have some company stock my grandparents bought for me years ago. If you do end up with a little left over in the food envelope, treat yourself to a nice dinner out, or buy something that’s food-oriented.īut it’s okay to carry a few categories over from month to month. Getting out of debt and managing your money wisely doesn’t mean going hungry. You should be hitting the budget pretty close each month on categories like food. There’s nothing wrong with letting a little extra build up in one of your categories if you don’t spend it all in a given month or two. Lots of folks don’t use all the money in their clothing envelope during a month. 59. Dear Dave: When you use the envelope system, what should you do with any leftover money? - Mandyĭear Mandy: My suggestion would be to carry it over to the next month.
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