The envelope system? Getting started!

[MamitaM]

I'd like to do this, but am not sure how it's done. I feel my money is safer in the bank then in my house in envelopes. Safer from ME that is since I have a bad habit of ordering in food if I get hungry enough and am to lazy to cook or get real groceries, I'm working on this issue though.

So how does this system work? Do I take out ALL my money when I get it and then divide it into envelopes? I pay all my bills with on-line banking so what goes to bills should really stay in the bank. Any advice and tips about getting started would be great. Thanks.

[aleatha5]

I don't know about how this works as a system, but I do keep an emergency fund in my house.  I keep only large bills (read $100s) in it.  My thought process is that if I have $20s or $10s in my secret emergency fund, I'm waaay more likely to spend them.  But, if I want to order a pizza and have to break a $100 bill to do it, I'm way less likely to.  I also know banks are safer, but I like having the added security of having a cash stash in my house, in case I ever need it.  

[KellyAnnW]

You have to do what works for you. My problem was I would look at the lump sum and think MAN thats a lot of money. I can buy this, this, and this. Pretty soon it was all gone. DH gets 2 paychecks a month. Each month I designate a the same amount for spending. Once a week I'll pull out that week's cash. I have to do it weekly because otherwise it looks like a TON of money to me and i start to spend too much.

My catagories are:

Groceries

Restaurant

Gas

Animals

Baby

Household

Floater (this one i deveolped because sometimes a catagory needs more so I'll fund from this, like a big grocery stock up)

I also use

Costco

Gifts

Depending on if the envelope is needed or not.

Its really a learning process. i kept using money from the Animal's fund because they didn't need any food. I should have  been letting it build up, that way when they need food we have the cash.  But i would see it and use it. I can't keep this envelope in my normal ones so i keep it in the zippered pocket of my purse. Out of sight, out of mind. Oh and my mom sews so she made envelopes for me out of cloth. Works great!

This system really works for me because I need to physically seperate my money to see that $40 is gas. A lot of other people can do fine with just spending as little as possible on the debit. It doesn't work for me. I'm frugal because I make myself be not because I'm naturally that way. Plus I can't remember every little purchase. This way I dont have to.

[eirual]

After creating a budget, and seeing how much you DON'T have...realizing that everything you have in your possession has a specific purpose can help (i.e. very specific categories....gas wk.1, grocery wk. 1, etc.).

Leave what's necessary for online banking and automatic withdraws in the bank, but take all other variable expenses out in cash and fire off any leftovers to debt or savings....and by all means if ordering out and eating when hungry is your weak spot- budget for it! Find out when and where your weakest points are through your week and prepare for them- up your grocery budget so you have more, cheaper food, or be sure to take snacks with you, or put a limit on what you spend per week.

It does take a few runs before it's a painless cycle- so don't be afraid to make mistakes.

[GirlBoyGirl]

Originally Posted by KellyAnnW 

My problem was I would look at the lump sum and think MAN thats a lot of money. I can buy this, this, and this.

This is me, too.

And one big point of the envelope system is that cash is supposedly harder to spend (because you feel and see it leaving your hand) but if that is the opposite for you, then perhaps it is not the best system. But then again, I doubt you will raid your gas envelope for pizza!

[curiouscanadian]

I just started our envelope system in early January and modified it a bit (ok, a lot) to make it work for us. I am just not comfortable having a lot of cash in the house, and since any cash would need to be split between DH & I, I just couldn't figure out how to make it work for us. I mean, ok, if you know you're going grocery shopping, sure take X amount out of the envelope and go, but I mean, if you figure out while you're at work that you need milk or ingredients for supper, but the cash is at home...? By the time I picked up DS in the evening, ran home for cash, ran back out the store, etc. it would not be a pretty scene by the time we were eating! lol

First off I started with Gail VazOxlade's budget to figure out how much I should budget in each category.

Because I followed her budget, our categories are:

Transportation

Food (and I should've split this into 2 groups - Groceries and Eating Out)

Entertainment

Clothes/Gifts

Everything else

I tried doing only cash for a little bit, but then if I lost a reciept (or DH forgot to get one) I had no clue how much had been spent. What it's morphed into now is a combined system of cash for smaller items, with Debit still being used for larger items. What I did commit to doing pretty much without fail every night, was updating - via Online banking & any reciepts - an Excel spreadsheet I created to track all the spending. It's strictly for the categories above, but I keep a running tally of each week beside our weekly "goal" so it's easy to see where we need to tighten our spending as the week goes on.

So far it's working pretty well to build awareness of where we're spending our money (MUCH too much eating out IMO) and adjusting it accordingly, although we do have the good fortune to not need to be as strict about it as some. HTH!

[babyjonesmama]

I also just started this system in January. So far, this is how it goes. I get paid every two weeks, and the size of my paychecks vary, but they are pretty much guaranteed to be at least a certain amount. So I double that amount and that is the amount of money we have monthly. Then I subtract all of the bills that I pay online or by check. I took the difference and split it in two, since I make two paychecks per month, and that left me with x amount of money for everything else for two weeks. So now I have envelopes for week 1 and week 2, and have taken out the cash from the bank for the next two weeks, right after I get paid, and put them in the envelopes. So far these are the envelopes that we have, although we are going to be adjusting this depending on how things go:

Groceries/Target

Clothing

Gifts

Gas

Spending money for me

Spending money for DH

Activities for kids

I need to figure out a way to add the following items in somehow, because right now they aren't budgeted for:

Eating out

Home Repairs/Maintenance

Car Repairs

Car Insurance

Unexpected large purchases.

I am also finding it really hard to stick with my spending money budget. the only thing that I really spend money on at all is coffee and food at work. I work full time, often 12 hour shifts and a few of them in a row, so it's really hard to get a lunch and dinner packed on those days. And I'm pregnant and just get so hungry sometimes. So I can easily spend $10 a day at work even though I've only allowed myself $20 per week. And even if I only spent that $20 / week, that's a lot! $80 per month is like a whole student loan payment or something. I would love to get rid of that spending but I don't think I can realistically.

I'm also still figuring out exactly what to do with overages, specifically on the grocery bill. Either leave them there and have extra - perhaps for eating out? Or else just put in less from the next paycheck and spend that overage on debt?

We just finished the second week of this, and while we got through it only spending the allotted amount, it wasn't exactly in the correct categories. Yesterday we took DH to the zoo and paid for it out of the clothing fund.  But I realized I put too much in the clothing fund and not enough in the activities fund so I was kind of OK with that. But like i said I need to adjust the $ amounts that go in the different categories. I expect to learn as I go.

The most impressive thing I found was that we were able to get by on $150/week for groceries, which for us is scaling back quite a lot. We usually buy kind of expensive organic foods, but I did some serious couponing and planning and was able to save quite a bit, knowing that I had to, as opposed to just going to the store and buying whatever I thought we wanted or needed, which is what we are used to doing.

Then on the months when there are 5 paychecks, I'll still take out the same amount for the two weeks worth of envelope spending and put the rest towards debt or savings or something like that. And anything over the minimum paycheck amount will go to the same - mostly debt.

[umsami]

I do this only for two categories... food and savings.

I put my grocery budget for 2 weeks in an envelope--and when it's gone, I stop spending.

I also have tried to have envelopes for birthday savings and holiday savings...and throw in a dollar or two when I have extras.  It's slowly adding up--and as we have six birthdays right in a row, plus two holidays...it should definitely help!

[meesh933]

We've been doing this for over a year and it works really well. Like someone else said, it takes a few runs to get it just right, but it is well worth it.

When my husband gets paid, I take out cash and fill envelopes in the following categories:

Grocery

Gas

Spending Money - We can both use "our" money however we want, no questions asked. If we want to eat out, this is where it comes from.

Clothing

Homeschool

Car Repairs

Gift-giving

Hair cuts

It works really well, and because we are able to stick to a budget, we've been paying down our  debt like crazy.

[curiouscanadian]

Originally Posted by meesh933 

We've been doing this for over a year and it works really well. Like someone else said, it takes a few runs to get it just right, but it is well worth it.

When my husband gets paid, I take out cash and fill envelopes in the following categories:

Grocery

Gas

Spending Money - We can both use "our" money however we want, no questions asked. If we want to eat out, this is where it comes from.

Clothing

Homeschool

Car Repairs

Gift-giving

Hair cuts

It works really well, and because we are able to stick to a budget, we've been paying down our  debt like crazy.

Out of curiosity, where do you pay for household stuff from? Say, for a new small appliance, can opener, WD-40, etc.?
 

[Juvysen]

we use this: https://www.eebacanhelp.com/login.php  But we have android phones.  I'm not sure if you can use it just on the web...

we put everything on our credit card (but keep careful track) because we save 1% or whatever via our credit card.  Buuuuut... I realize credit cards are what many people are trying to get away from. 

I agree with others that having cash in hand may not be best for you if you feel like it's easier to spend that way.

[melissel]

Originally Posted by curiouscanadian 

Originally Posted by meesh933 

We've been doing this for over a year and it works really well. Like someone else said, it takes a few runs to get it just right, but it is well worth it.

When my husband gets paid, I take out cash and fill envelopes in the following categories:

Grocery

Gas

Spending Money - We can both use "our" money however we want, no questions asked. If we want to eat out, this is where it comes from.

Clothing

Homeschool

Car Repairs

Gift-giving

Hair cuts

It works really well, and because we are able to stick to a budget, we've been paying down our  debt like crazy.

Out of curiosity, where do you pay for household stuff from? Say, for a new small appliance, can opener, WD-40, etc.?
 

If you know household expenses are going to be a running category (and for most of us, they are!), make a category for it, budget the money, and make an envelope. There's always something you need for the house or something you need to be saving for. For us, this month, it was a new fluorescent bulb and toilet repair supplies (again! ).