We don't use physical envelopes of cash, but I use Quicken and track a LOT of categories.
A few thoughts:
~ Have you tracked your actual spending for a few months? It is easier to build a reliable and realistic budget when you know what you really spend.
~ There are multiple ways of achieving the same goal. You can go cold turkey and slash the budget and figure out the details along the way. You can track your spending for a couple months and ease your family into a new frugal lifestyle over a few months. You can track spending for several months and ease your family into a more frugal lifestyle over a year. And lots of other speeds/styles. What works for you will depend on a lot of factors: starting point, end goal, level of determination, family dynamics/cooperation, income level, etc.
~ For a fun family-oriented summer, start checking out the web to find all the free local events now. Summer concert series, free museum days, movies in the park, summer movie programs (theaters), crafts/project days at big box stores (some are free), free classes around town, guided nature walks, etc. Poll the family and start writing these free activities in the calendar first. Then check out low cost activities, such as half-price days at local attractions, kids eat free restaurants, classes/crafts/project days around town with a low fee, etc. Poll the family and choose a few for the calendar. Then fill in with non-scheduled freebies and low cost activities: library, playgrounds, beach, parks, nature walks/hikes, pool, playdates, etc. If there is one very popular place with your family that does cost something substantial, is the fee tax-deductible? For us, we get one family annual pass per year to a local attraction that is a non-profit organization and take the tax write-off AND enjoy family fun days. Examples: zoo, aquarium, museums. We rotate which one each year and we just schedule it once a month year-round, so we don't get bored.
~ For us, all haircuts come out of "beauty", as do other such services (brow waxes for me once in awhile). Cosmetics and other physical items sometimes come out of "beauty" and sometimes come out of "household" and sometimes come out of my own personal spending. It depends.
~ In my Quicken budget, I track categories monthly and I track them yearly. When I set up a new budget (spending plan is what I actually call it), I average some categories and take the highest for other categories and take the lowest for yet other categories. It all depends on past experiences.
~ I use the highest actual monthly amount for telephone, gas & electric, cable & internet, and gas for the cars. These are expenses that we have far less than control over than meets the eye. The choices are keep and pay the going rate or drop. Our family has reached the lowest usage possible already, although I do call the cell and cable companies several times a year to ask for lower plans. (We bottomed out several years ago, but I keep requesting.
) Our driving habits use the lease fuel possible for our family, so the rest is dependent upon the price of fuel. If there is extra in any of these categories in any given month, it just sits in the checking account to buffer any highs elsewhere that month (equivalent of moving the cash to another category in that month).
~ I budget an average of last year's actual expenses for most categories. I'll go slightly below the average when it is a category we want to reduce. "Dining" is the one we've worked the hardest on for the last few years. I'll go slightly above the average if it is a category we suspect the costs are going to increase or we want to increase this category. "Food" is the one for us. We've worked to drastically decrease our dining out (for health reasons more than financial) while consciously raising the food dollars to sustain a healthier diet. The net amount spent is lower overall, but it has taken work on my part. Most categories are a straight average and I leave the money in place to balance out the high months and low months (equivalent to leaving the cash in that envelope month-to-month).
~ There were a few categories where I budgeted the lowest amount spent last year for the coming year. These were categories I want to phase out (beauty is an example) or they just aren't a focus this year (furniture and clothing are examples). In the case of "beauty", it was important for me to figure out this sneaky category and gain control over it and now it is stable enough to combine with another category. For the first half of the year, I plan to leave any extra funds each month in the given category for a cushion (equivalent to leaving cash in that envelope month-to-month). For the second half of the year, I may switch to using it for the month elsewhere if I haven't used it (equivalent to moving the cash to a different envelope). There are two small pieces of furniture I am still looking for and I am waiting to find the perfect pieces, so I will leave the funds there for that category. If I find them this year, then I'll drop that category altogether next year. If I don't find one or both this year, I'll adjust the category amount next year.
