a question about budgeting "methods"

[red and lulu]

me and dp keep having this same circular conversation, and i'm thinking maybe i'm just not explaining my thoughts well or maybe i have the wrong idea....

i want to institute an envelope system. here's how my understanding of that goes: we put our budgeted money for groceries, toiletries, entertainment, cat food, whatever in separate envelopes, and then throughout the month use the money in those envelopes. leftover can rollover or go into savings. the benefit of this, as i see it, is that we always see what we have, and since we're paying cash, won't end up getting "just one more thing" or thinking "oh there's more in checking anyway" as we use our debit card.

he thinks this idea is stupid. he doesn't understand why we can't just have a joint checking account with two cards, and then keep a running tally of money spent in the various categories to make sure we don't go over budget. i feel that is more complicated, especially since i can barely remember what day of the week it is, let alone manually keeping track of a balance.

he also thinks that envelopes won't work b/c of his pay schedule and since his pay varies week to week. he's arguing that he already is used to living week to week, and there's no way to get out of that. i'm arguing that the envelopes will help get out of that and save us a few extra dollars a month.

thoughts? is that more or less how your envelope system works? do you do something else entirely?

[MtBikeLover]

I don't do the envelope system as I prefer to have my money in a bank, earning interest. It isn't a lot since interest rates are low, but I get about $50 a month so it covers my cell phone and internet bills.

I've never really understood the envelope system and thought it too complicated to try to understand it. For example, if I am at work and don't have the envelope with me, but decide to run out at lunch and pick up some toiletries for the house, how do I pay for it?

I am also not a cash person. I would find it incredibly hard to keep track of so many envelopes. Plus, I budget food, toiletries, gifts, toys, etc all separately, but I typically buy it all together when I run to Target. It seems it would get complicated to have to move money from envelope to envelope.

So here is what I do....

I have an Amex credit card that gets paid in full every month. I put ALL my expenses on it. I also have a budget excel sheet and I track every expense I make on that sheet. I spend less than 5 minutes a day, but I know exactly where my money is being spent and in exactly what bucket. I also know how much I have left to spend for the month.

I save my receipts for whatever purchases I make and then enter them into the file at the end of the night. If i ever lose a receipt, I just look it up on the amex website and log it in.

[RollerCoasterMama]

I tried paper envelopes with cash and it just didn't work for us. We used debit cards too much. But I've been using mvelopes.com for the past year almost and after a learning period, I love it! The downside is that it's a paid service. Mvelopes uses budgeting envelopes but tracks debit card charges.

So when we have a paycheck I say, ok: $100 for groceries, $80 for electric, half of next month's rent, preschool tuition....ect until all of that unallocated cash is divied up. I made a plan for my money as soon as I got it. (In theory, I'd like to get a month's worth of cushion built up so I can fund the whole month on the 1st, but I'm not there yet.)

So every couple of days I log in (usually a few minutes over lunch break). I see the new charges and I put them in the right envelopes. When I spend more than I'd planned on a certain category, that envelope is in the negative and I have to shuffle something from somwhere else to cover it. If I've got extra, I can leave them for next month, or sweep them into an extra debt payment.

I really love it!!

There are some learning curves involved, and tracking savings takes a little getting used to...but I happily pay the subscription fee!

p.s. I should mention that I also keep a sort of checklist with the recurring bills. Just a print out with the usual due-dates and room for extras that I might add in. Then as I "fund" an envelope for that bill, I check it off as funded. And later after I actually pay that bill, I check it off as paid. That way I know how I need to prioritize! It's always a little geeky exciting when I get to the point in the month where I know there is money for each of the bills allocated and ready to go!!

[EFmom]

Well, I'm pretty budget savvy and I'm with your husband on this. We've always had a joint checking account, and it's worked just fine. The envelope thing would make me insane, and I don't like dealing with wads of cash.

I remember my mom and dad having a big fight about this very thing 40 years ago, and they never fought. My dad wanted to try this envelope system and my mom, who was as frugal as they come, almost killed him after two weeks of it. The envelopes disappeared once my dad got told he could take over the finances and do all the shopping with his stupid envelopes.

I always chuckle when people credit Ramsey for the envelope system.

[BetsyS]

What works for us is to use virtual envelopes (ala mvelopes), and then I actually use cash on my major problem area (groceries).

I'm not sure what it is about groceries. I could just spend and spend and spend and spend. There's always another great deal to be had, always another pretty vegetable to buy, always a treat to get, etc, etc. So, before going to cash, I was always at least $5 or $10 over my budget. Always. And it does add up. So, I switched to cash. I sometimes buy milk with coins at the end of my budgeting period, but I stay in budget.

For other categories, I don't have as much issue, so the debit card/virtual envelopes works just fine.

[canuckgal]

I use this and love it...

http://www.budgetmap.com

It is sort of an envelope system on paper, simular to mvelopes, in a checkbook ledger, with your grand total divided in columns into categories (utilities, etc). Do the subtracting the old fashioned way with a pencil lol. We are both paid bi weekly the same weeks, and I tend to divide everything by 24 instead of the usual 26 pays (to "save" those 2 extra pays a year for something else...but you have to already have a cushion of at least a month's expenses in the bank to do this). For example, if you have a regular bill/expense of 100.00 per month, that equals 1200.00 per year. Divide by 24, or 26 if you choose, and that is how much you have to put each payday to that "category"

I take out cash for gas, groceries, personal spending money for each of us, and the kid's allowance. The key to making this work is to DILIGENTLY subtract something when you spend it and keep up. Debit is for everything else, but I be sure to get my reciepts and go to the book and enter it that day when I get home, and look at the book if I am going to a store, to know if I have enough in the Home Repair category for instance to buy paint.

As far as the variable income (we have that with my paychecks) I would go at some of your past pays, and try to make a budget based on that minimum you think you would make. I have done this, and anything extra we make goes onto the debts we have, on top of our usual payment.

Hope this helps. My cashflow has improved immensely since discovering this product!!

[Belia]

I've been using envelopes ever since I graduated college- 15 years ago. I really like it!!! And it really works for me.... and now DH for as long as we've been married.

I've never had a problem with the "not having cash with me" issue. I think about the errands I'll be running each day in the morning and bring enough money with me. I don't stress the categories too much, and I've been known to shuffle cash around at the end of the month if necessary , but it really forces me to be thoughtful about my money.

I dunno- it really works for us.

[amyamanda]

Originally Posted by CJsMama

thoughts? is that more or less how your envelope system works? do you do something else entirely?

One of the things in your situation that would stress me out would be both spouses trying to be responsible for one joint account. Here is what we do: We have two joint checking accounts. One has my name first, one has his name first, so it's easy to tell 'whose is whose.' Either of us could transfer money back and forth or access both accounts in an emergency.

The basic idea is that when we get paid, we divide that money up between the two accounts based on who is responsible for what. He is responsible for some expenses and I am responsible for some expenses. So then we are each free to manage his chunk in the way that makes sense to us. You could use the envelope system for your chunk and he could use the tally system for his chunk.

Currently I use a simple Excel spreadsheet, with a new page/clean template for each month, and I just realized that I basically do the envelope system in Excel. I withdraw a specific amount of cash for the things I know I will pay cash for, and label/fold/separate it with a post-it and a paperclip. (Loose change goes in the parking meter jar).

But I don't like to carry around a lot of cash, because I am afraid of loss or theft, or of not having the right "envelope" when I need it, so I write checks for everything else. I use duplicate checks so that I always have a record of my spending, and I use the duplicates to enter the information in my spreadsheet. (My bank account is the "totally free" kind where I get my checks for free.) People think it's old-fashioned to use checks, but honestly, if I use my debit card I don't keep track of my spending - the receipts get jammed in a pocket or scattered somewhere and I forget. With checks, the duplicate is fixed in my checkbook, which I always carry around, so I don't lose that record. And it is good for me to physically write out where and what I am spending so I am absolutely aware of it (no easy swipe-and-run).

The only exception is gas - I do use my debit card for gas, and I have to try extra hard to remember to write it in, but it's only one thing so I stay on top of it. I'd rather not deal with the kid dilemma at the pump - leave them in the car while I run in and pay, or drag them in with me? - or I would go to a cash system for gas.

For my system to work I have to not use my debit card unless there is no way around it. If I make an online purchase, I am on my computer anyway and record it immediately in my spreadsheet. But I don't ever use it for
"just one little thing" because I agree, it is way to easy to say "there is money in the account...and way easy to forget how fast those little bits add up.

Anyway, you could do an envelope system and your DH could do something else and you would have your own separate accounts to tally in the way that made sense to you.

[mnnice]

Originally Posted by CJsMama

he also thinks that envelopes won't work b/c of his pay schedule and since his pay varies week to week. he's arguing that he already is used to living week to week, and there's no way to get out of that. i'm arguing that the envelopes will help get out of that and save us a few extra dollars a month.

thoughts? is that more or less how your envelope system works? do you do something else entirely?

I personally think that lots of different systems will work for different people and one joint account or envelopes can both work I the individuals involved are commited to having it work. I think statements about pay periods are just noise. It shouldn't matter if you are paid monthly, biweekly, semi-monthly, weekly. At some point you just need to decide to not run so lean that you have a little cushion in your account. However, the part I bold in this sentence bothers me. It says to me I am happy with the way it is right now (IMO paycheck to paycheck really shouldn't be okay with anyone--not that everyone is currently in a situation where they are able to do much about it. It's a stressfull way to live and I don't think people realize how stressful it is until they stop living that way.)