Anyone use an "Envelope System"?

[JayGee]

Every month I find I spend too much on groceries, toiletries, etc. I usually pay for these purchases with our debit card, but was wondering if using cash (ie. envelope system) would help me curb my spending? How can I figure out what a reasonable amount for a family of 5 would be anyway? Our annual income will be declining by about $20k-30k at the end of this summer and I want to practice living within our "new" parameters now.

FWIW, we have no CC debt, no student loans or car loans, but have a mortgage on our house. Any other suggestions for trimming my budget???

[TwinMomPlus]

You could write down everything you buy for the next couple months and see if you notice any pattens on spending.

Also, look at the sales circulars and clip coupons and shop what is on sale.

A lot of people benefit from an envelope system because when they see cold hard cash leaving their hands they pay more attention.

So you could try using cash for these purchases. Start out putting what you think you normally spend on groceries, and subtract say $50-$75 so you can challenge yourself to spending on a lower budget. It might take a few months to get it down to a better idea of how much money to include in each envelope but soon you will know.

Another idea would be to start living on your new income now. Pretend that is your new income and the rest of the paycheck you can put in savings.

[Pumpkin_Pie]

Originally Posted by TwinMomPlus

You could write down everything you buy for the next couple months and see if you notice any pattens on spending.

I am in the middle of this right now. I started writing absolutely every penny down about a week and a half ago, and have had quite the eye opener. I now search for a much longer amount of time trying to find a parking space without a parking meter to save change, or I take the first spot I see and just walk further. I really question whether I really NEED that cute shirt for DS at the thrift store. Etc, etc, etc. Seeing everything written down right there for me to go over makes it so much more real and it has definitely helped. I am planning to do it for a month or two and then create a budget from that to include indulgences, but not go overboard quite so easily.

[zinemama]

The envelope system really seems to work for people who can't control their spending and are not naturally frugal. I can't see the point otherwise.

For the OP, it's certainly worth a try.

[SuzyLee]

Originally Posted by zinemama

The envelope system really seems to work for people who can't control their spending and are not naturally frugal. I can't see the point otherwise.

For the OP, it's certainly worth a try.

I am naturally frugal but the envelope system still really helps me.

I got a wallet/clutch thing at Target that has zippered compartments. I have one compartment for groceries (400/month) 1 for household (50) 1 for kids (100) and 1 for my fun money (50).

DH gets his own 50$ cash, and we pay for car stuff (mostly gas) with CC's and pay them off every month.

It works for me bc it forces me to plan a bit better and stop spending when I am out of money. When I am just swiping a card I don't keep as good of track of how much I am spending, and if we are at the end of the month and out of money in the budget and we "need" something, I will just buy it, figuring we "need" it. But if I am out of cash, I have to wait until the next month. That forces me to be much more careful.

[TwinMomPlus]

I agree, it doesn't have to only be for people who aren't frugal or have out of control spending.... it can be for anyone...

[zinemama]

Originally Posted by SuzyLee

I am naturally frugal but the envelope system still really helps me...It works for me bc it forces me to plan a bit better and stop spending when I am out of money. When I am just swiping a card I don't keep as good of track of how much I am spending, and if we are at the end of the month and out of money in the budget and we "need" something, I will just buy it, figuring we "need" it. But if I am out of cash, I have to wait until the next month. That forces me to be much more careful.

See, from this description, I wouldn't call you naturally frugal. To me, being frugal implies being careful with spending no matter what, planning ahead (for meals, etc.) and always keeping track of how much you have to spend, regardless of whether you shop by check, cash or card. So for people like this, there's really no need to have the envelope system in place, "restraining" them from unwise purchases.

I still don't really see the point of it for people who do all those things. Maybe someone can explain it to me.

[Mylie]

I use it...

I get paid every two weeks for each job ..So I get paid every week so to speak..But the one job is only for 8-12 hours for two weeks so it really isn't much..

I don't have many bills because I have cut everything out to be as frugal as possible..I pay my car insurance at income tax time so it is paid up for the year..This really helps me.My health,life insurances are taken right out of my check bi-weekly before I get it..And my little girls daycare is taken out before I get it also..Here is what I do...

Rent...
Electric..
Gas(heat)...
phone...
Internet...(my only splurge and it is dialup)

I have an envelope marked for each of these bills..These bills are marked on the envelope when they are due because they are due the same time every month.These bills are taken out before I even look at gas and groceries/household stuff.Every two weeks when my check is deposited I get the money out and put half of every bill into each envelope..I have about 100$ left after those are paid for two weeks for our other exspenses..That is for gas,diapers,cat food and toiletries(I am very frugal when it comes to this stuff)..The money that I make from my other partime job I don't envelope..It is only 8-12 hours every two weeks and I use that for groceries.

For me the evelope system is a must because if by some slim chance something would bounce(my fault,their fault,deosn't matter)it would put me in the hole and take me weeks and weeks to try and get out.

I watch kids occasionally for extra money too..That is never enveloped..That goes right to an immediet need like shoes for L or I owe the copayment at the doctor's office...Every blue moon though we get to use it for fun..

I think the envelope system is wonderful for people in my kinds of situations..It tells you exactly what you have to work with and what you are spending..If you go into the grocery store with a debit card you mostly don't pay exact attention if you go over your budget by 20$...But if you walk into a grocery store with 40$,a list and nothing else you are going to stick to that list.

I think it could work for anyone who wants it whether they need it finacially or not..it pretty much tells you the truth on what you spend..

HTH

[JayGee]

Thank you everyone . I'm not particularly careful financially, so I am sure it would work better for me than the current situation. I did track ALL our spending for two months and the amount I spent on groceries alone was obscene. DH was horrified. So it's time to put myself on the envelopes. No idea how much, but I'll start about $75/week less than what I saw I was spending when I tracked it.

[KellyAnnW]

We use the envelope system, I love it. I budget down to the last dollar (there is some leeway in case I made a mistake or something comes up) so if i used a debit system I'd have to write down every little purchase. Too complicated for me! Yesterday dh and i went outlet shopping, we spent our spending budget, and our eating out budget. We've got nothing left there for a few days, and its easy to see because the catagory is empty.

I use a coupon organizer from the dollar store (they had some tropical ones that have more catagories then the usual size, very handy) and only carry 2 weeks worth of money with me. Our catagories are Groceries, Entertainment, Animals, Gas, Eating out, Spending. If we have money for it I'll add Car, and flower money. I do pay all the bills online. We use the envelope for spending we have more control over. It helps me a lot, when the money is gone, its gone.

[TwinMomPlus]

Question for those who use this: What do you do with leftover money? Put it in savings or carry it over?

[SuzyLee]

Originally Posted by zinemama

See, from this description, I wouldn't call you naturally frugal. To me, being frugal implies being careful with spending no matter what, planning ahead (for meals, etc.) and always keeping track of how much you have to spend, regardless of whether you shop by check, cash or card. So for people like this, there's really no need to have the envelope system in place, "restraining" them from unwise purchases.

I still don't really see the point of it for people who do all those things. Maybe someone can explain it to me.

Well, what you are describing as frugal I would describe as anal

I think of frugality as being... make from scratch, grow a garden, buy in bulk/buy generic/buy in season, plan your meals around sales flyers, etc.

But how either of us define frugality si neither hear nor there with respect to the OP's question.

For the poster who asked about carryover, I do carry money over. If I don't spend my whole budget one month, I save it for the next. For groceries, for example, I will try to save up a little extra before DS's birthday party or other holidays. Same for kid's spending- I save up extra beore birthdays and xmas, or to sign up for a kiddy music class or whatever. If we routinely come in under budget we consider lowering the budget.

[zinemama]

Originally Posted by SuzyLee

Well, what you are describing as frugal I would describe as anal

Ha! We all have different takes on things. But is it really that unusual for people to balance their checkbooks and thus be able to tell at a glance how much of the month's money is left? Or am I just really old-fashioned?

[eirual]

I love the envelopes for many reasons. It really holds you accountable for your consumption.

OP, if you can find time to hit up the grocery store without kids, I'd try to go with a MENU PLAN (decide which 7 meals you'll eat, what you have in cupboards that you don't need to buy, and what you do need to buy to make those meals), buy ONLY what you need and see what the total is. While you're doing that, you can make a price book (alphabetical cue cards on a single ring where you can write down how much your staples are at your store...M-milk: $5.49, B-butter: $3.49, etc.). You could THEN go back through and get your "extras" and compare the two totals (if you could stop after bare necessessities that would be ideal, but baby steps...). I also walk around with my cell phone or calculator and everytime something goes in the cart, it gets entered into the calculator and I keep a running total so there are NO surprises (for fruit or things that go by weight you start to get a general sense of what you get costs and it's better to over estimate than under estimate).

If you have other grocery stores around you you could then take your price book and compare prices at another grocery store, making note of their prices. I haven't gotten myself organized enough and don't get circulars for other reasons, but I've noticed the cheaper grocery stores are great and much cheaper for pantry items (tomato sauce, boxed tea, toilettries, etc...) while I don't love their produce or bakery items.

ETA: you could even separate your cart into WANTS and NEEDS...in fact that's what I'll often do at the check-out, put things that you absolutely NEED up through the cash first, check your total, then go from there. Often times, impulse buys don't make it past the checkout....mind you if I have my calculator it's usually a non-issue since I can see my total as I go and know that I can't manage putting more in the cart.

[KellyAnnW]

We do carry over. Like the animals get a budget every week but they have one big purchase a month and several small ones a week. (big- two big bags of food, one for cats one for dogs. Little purchases canned food, green beans, litter, treats etc) So even though there may be $70 i know that two bags of food is $80 and I can't splurge on that really awesome dog toy. But if the grocery budget has an extra $20 I know I can stock up or splurge on something yummy. None of our categories get really large carryover (i would lower the amount the categories get if there was a lot of extra) but if we did the extra would go into savings.

We used to blow the budget every week in till we added a category for entertainment. Now that we have a specific category each week for entertainment we actually spend less then before. This system works wonderfully for my family.

[mum4boys]

Originally Posted by zinemama

Ha! We all have different takes on things. But is it really that unusual for people to balance their checkbooks and thus be able to tell at a glance how much of the month's money is left? Or am I just really old-fashioned?

Just balancing the checkbook does not tell me how much money I have spent for food versus clothing versus mad money. It takes more time to get a more detail expense report. At a glance in my envelope I can see exactly how much I spent for food etc.