A couple who paid off $133,000 in debt, including 16 student loans, swears by a stunningly simple trick to keep from overspending

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Amanda, a 30-something IT worker, and her husband Josh paid off $133,763 worth of debt in under four years, according to a recent feature on the blog Making Sense of Cents.
Amanda said they were able to pay off the debt because they worked to increase their income and cut their expenses and spending mercilessly.
During their debt payoff period, the couple implemented the zero-sum budgeting method, wherein they paid for their everyday expenses using the cash envelope system.
Every paycheck, the couple takes out enough cash to cover groceries, gas, and other items. They separate the cash into different envelopes and spend only what they have, and put what is left in their account toward debt payments or their next savings goal.
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When you’re paying off six figures in consumer debt, every dollar counts.

It’s been nearly a year since Amanda, a 30-something IT worker and blogger recently featured on the blog Making Sense of Cents, and her husband Josh paid off their combined debt after about three-and-a-half years of making payments.

"Our debt totaled $133,763 and consisted of 16 student loans, 8 credit cards, 2 vehicles, and 1 personal loan," Amanda wrote. "Nearly half of our debt was my student loans from my associate’s and bachelor’s degrees."

The couple was able to pay off their debt, in part, because of an increase in income totaling $75,000 from raises, overtime, and on-call pay during those years. But more money coming in meant more money to potentially spend. They also cut their expenses mercilessly, Amanda said. They lived in a 550 square-foot home for most of the time (albeit still in pricey San Diego), took no big vacations, and paused expensive hobbies.

But there’s one stunningly simple budgeting trick they started using to curb spending while paying back their debt that they still use today: the cash envelope system.

How to use the cash envelope system

As Amanda explained, "Cash envelopes are a budgeting method where you take out cash for specific categories instead of using your debit/credit card for purchases. Each payday we take out money for groceries, gas, spending money, and any sinking funds we’re saving for. For that two-week period, all groceries come out of the grocery envelope. Same with gas and spending money. Once it’s gone, it’s gone!"

The non-cash funds are put directly toward debt payments, Amanda said, leaving their accounts nearly empty. "We had our emergency fund in case anything happened, but spending too much on groceries is not an emergency," she said.

There’s something about spending cash that plants you firmly in reality. It’s easy to see what you have — and what you don’t. Unlike debit and credit cards, cash is all but impossible to reclaim if it’s stolen, but Amanda says the benefits outweigh any risk for her.

"This method really helps curb your spending because you feel it more when you use cash. It’s also easy to look in your wallet and see how much money you have for each category to stay on track," Amanda said. "Josh is a spender and he’s had great success with cash envelopes. I had a wallet with several dividers made for him to make it easy."

Amanda said she was able to figure out exactly how much cash they needed for groceries, gas, and other spending money each month by creating a zero-based budget.

A zero-based, or zero-sum, budget requires you to assign every dollar a job. Your checking account balance ends up near zero at the end of the month, and every dollar has been optimized. While Amanda prefers to spend down her money in the form of cash, writer Holly Johnson puts everything on credit cards.

If you’re uncomfortable carrying around cash, or would rather use credit cards to rack up rewards on your purchases, you can still use a virtual envelope system by separating designated funds for each spending category into separate savings accounts and using those accounts to pay off your credit-card balance each month.

"A budget doesn’t sound sexy or fun, but it gives you freedom to spend money on the things that matter to you," Amanda said. "Budgeting doesn’t mean you have to cut out all your fun! Put it in the budget. The point is to know where your money is going and to spend it intentionally."

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