DR Envelope Question

[Belia]

I've always done envelopes.... ever since I graduated college 15 years ago.... but only for a few basic categories. Everything else went on the credit card, that I then paid off every month.

DH & I are starting DR full force this month, and we did our budget for the month tonight. And I feel like I'm missing something.

WE HAVE SO MUCH CASH ON HAND NOW. It's kind of disconcerting.... I feel like we must be doing something wrong. Like, if we're on a financial-peace-debt-reduction plan, shouldn't I feel poor? Instead, I feel like I have more than enough money to make it through the month.

Over the past 3 months we have written down every penny that we spent and based our budget off of that. We honestly don't have much to put towards debt..... but at the same time, I didn't want to tighten up the budget too much and not be able to stick with it.

I don't really know what my question is. I just have this nagging feeling like I'm missing a major concept here.

[cschick]

Originally Posted by Belia

I've always done envelopes.... ever since I graduated college 15 years ago.... but only for a few basic categories. Everything else went on the credit card, that I then paid off every month.

DH & I are starting DR full force this month, and we did our budget for the month tonight. And I feel like I'm missing something.

WE HAVE SO MUCH CASH ON HAND NOW. It's kind of disconcerting.... I feel like we must be doing something wrong. Like, if we're on a financial-peace-debt-reduction plan, shouldn't I feel poor? Instead, I feel like I have more than enough money to make it through the month.

Over the past 3 months we have written down every penny that we spent and based our budget off of that. We honestly don't have much to put towards debt..... but at the same time, I didn't want to tighten up the budget too much and not be able to stick with it.

I don't really know what my question is. I just have this nagging feeling like I'm missing a major concept here.

It sounds like you're starting from a different point than a lot of people who engage on this type of budgeting. You've never really been in a situation where more money was going out than coming in; where you ended each month more deeply in debt rather than less.

Live through the first month on the plan, and see if you get to the end with a surplus or right on schedule. If you've got a surplus, it's because you've naturally identified other places where your monthly budget can be reduced via the pressure of only using cash. Going forward, you can adjust to tighten up in those places. If you're right on schedule, you've identified a decent budget for yourself and you've got a good idea of how much money flows out each month.

[laohaire]

I agree with the PP but also just wanted to throw out a thought: have you budgeted for more occasional things as well?

- Holiday gift-giving?
- Other gifts (birthdays, father's day, what have you)?
- Any annual taxes or insurance?
- Vacations or family travel?
- Winter heat or other winter expenses?
- Auto maintenance or repair?
- etc.

[mnnice]

Originally Posted by Belia

WE HAVE SO MUCH CASH ON HAND NOW. It's kind of disconcerting.... I feel like we must be doing something wrong. Like, if we're on a financial-peace-debt-reduction plan, shouldn't I feel poor? Instead, I feel like I have more than enough money to make it through the month.

Your budget is based on your actual expenditures. That's how much you have been spending. You and most other people would be shocked at how much it is when it becomes a stack of $20 bills.

We went to a cash based system in Jan of 2005 and really like it. You get used to having more cash around. We each keep some in our wallet and more in a secure place in the house that we replenish from. We don't have complicated categories and actually pull for different envelopes.

We also each end up with one or two purchases a month that technically should be paid from the envelope, but because they were on-line or we forgot to bring enough money and we used another method of tender. That cash is taken out and applied to the next months budget.

In 2001, my DH bought a truck a purchase he has regretted a few times over the years. Anyway he says has said more than once that if he had to have had a stack of $100 bills to pay for the truck he never would have spent that much on something to drive.

I think going to a cash helps people be more disciplined and there are lots of much smaller examples of "If I have to pay cash for this right here and now I don't think I want or need it that bad." in everyday life. As a former "put it all on the credit card and pay the full balance monthly" I know my household spends less as a result of using cash. Besides all the rebate and mile cards have cut way back on their benefits anyway.