Anyone else use the envelope system?

[ilovebabies]

We just started. We did it years ago back when we took our first class on finances and budgeting but we're realizing we need to "go there again" and get serious.

I've spent many hours over the last week organizing our finances and getting the envelopes started. We already notice a difference! So glad we did this.

Anyone else do this and it really works for you? How long have you been doing it and how detailed do you get with the envelopes?

I think the hardest part is getting started, all the numbers involved has made my head spin! Also, it would be great if we had a month's worth of money to put in each envelope to jump start us, but we can't. We'll just start with what we can and keep adding.

Today it was cool because my dh was finishing up painting the outside of the house but ran out of paint. He needed to go buy another gallon so I just pulled our "home maintenance" envelope out and whatever was in there was what we had to work with. Since we just started I knew there wouldn't be much in there yet, but we had more than enough!

[sanguine_speed]

Because of our lifestyles (busy!) and all, it's not practical for us to have all of the grocery money physically contained within one envelope. Such that whomever does not possess the envelope cannot purchase groceries. We'd end up doing far too much switching money around because someone had to pick something up or whatnot. For instance, last night we found out we were going to be responsible for bringing a particular dish to a family thing today. Well, if the grocery envelope was at home, and we could only use the money that physically came from the envelope, DP would have had to come home, out of his way, and gone back out again for the ingredients we needed.

So, what we do instead is we keep a written record of each budget category. So, it does not matter where the money came from (as long as it's not credit!). The bottom line is the bottom line for us. It works well. We can be "out" of money for a budget category without having an empty envelope.

I also have a very serious memory problem, and I think it is likely I would lose envelopes/cash.

Obviously the envelope system works well for some people. But it's not for us.

[inkedmamajama]

what are the specifics of the 'envelope system'?

a

[Citymomx3]

We started doing this a couple of months ago and I can't believe how well it's going. I have envelopes for each one of the kids' activities (dance, guitar, and vocal lessons), a groceries envelope, and one for miscellaneous. I prefer to pay cash for everything or else I constantly am overdrawn. Every time dh gets paid (bi-weekly), I do all the bills first, tell him how much cash to take out of the bank (I always leave at least $50 in the bank) and allot the money to the different envelopes. I get paid weekly. First I give the kids their allowances (I swear it saves money giving them a set amount for the week), put about $150 in the groceries envelope, and the rest gets dispersed throughout the other envelopes. This week I was flabbergasted to see over $600 in the dance envelope!

This has saved us from constantly being short, wondering where the he!! the money went. I think we'll be doing this for a long time

[happyhats]

We've just started to live by the envelope method, and it's going well thus far. I think it is something that you have to keep track of, but that's also the point. In my case I think it's easier to spend my money where I need it to go when it is in smaller slices. Carrying around a large amount of money, in check, cash or debit form, makes it easier for me to overspend in one area and not have enough in another. This way I see what goes where and how much is really needed for what. Since I'm just starting out it may need a tweak now and then but I think that's true for all budgets.

[ilovebabies]

Originally Posted by inkedmamajama

what are the specifics of the 'envelope system'?

a

Basically you have envelopes for all your living expenses and you figure out a budget within your means (that may be what you are currently spending, or it may not be--so you'll need to adjust it if necessary) and you set aside so much per week or month to place in those envelopes. When you need money for that area, you use what's in there.

You can also put all the money in your checking account and keep track of each expense on a sheet of paper. You would write down "deposits" and "withdrawls" for each category. This works great for some people (I think one of the pp mentioned this works great for them), but some people need a little more control and that would be us! Having access to the checking account for everything would make it more difficult for us and too easy to go over our budget.

We do not use the envelope system for bills we pay online (mortgage, phones, electric, and so on). We keep the money in the checking account for those things and for our savings of course. But we take the cash out and disperse it into the envelopes for just about everything else. Here are the envelopes we have:

Grocery
Home Maintenance
Auto Maintenance
School (we homeschool so we have a budget for this)
Clothing
Medical
Dental
Eating Out
Family Activites (like entertainment and recreation)
Home Purchases (beyond maintenance like a new lamp or new furniture, etc.)
Haircuts
Gifts (b-day, Christmas, anniversary)
Kids' Allowance
Ballet & Guitar

Again, you can get as detailed as you want. Some people would lump several together into an "entertainment and recreation" category or "personal" category. We need more though.

We put so much per week into each envelope (I take a yearly total for each category and divide by 52). And it helps us be very careful with spending because, for example, we allow eating out at a restaurant twice a month (and for our family of almost 7, this is about $40 per visit). So, when the money is gone, no more eating out that month.

Probably more than you wanted to know!

[holidaymama]

Using the actual envelopes helps us imensely! I used to just pay all the bills out from checking (we are paid once a month) and then I would say Ok...I have 1600 left...that's 400/week. And that's as far as I would dig...well sometimes things come up and closer to the end of the month it would be...well there's 2 weeks left and 4-500 left so that's 2-250/week...but then you need gas for two cars and groceries and by the end of the month we have only a few dollars!

With the envelopes it's called well I spent the money out of the clothing budget...no more clothes for the month period.

but there is always the money we need in the gas fund because I can't touch it in a checking account.

We keep our savings in our checking account until we get paid the next month then move the savings into actual savings. It's just a cushion in case of an emergency...so we don't have to use credit cards

[tinybutterfly]

We do the envelope system.

Been doing it about 8 1/2 years now.

We have very basic categories.

Food, Medical, Auto, Entertainment, School.

Anything else gets taken out of the checking account ( normal bills or any extra expenditures ( which we need to reign in by the way.)

It has helped keep our grocery bill under better control for sure.

[PapayaVagina]

We do! Or at least we usually do, but I got out of habit in the last month. We keep an envelope usually for groceries and gas, but would love to get more in the future. Whenever we've taken vacations I've always used the envelope system and we always came home with way more money than what we'd thought. I was shocked at how much this has helped with our grocery bills and it makes it extra easy that I don't have yet another receipt to make sure I enter into the register

[Attila the Honey]

The envelope system has been the "missing link" between what I want to do re. budgeting and what I actually do! I am so happy with it.

I have very basic categories; heat, elec, water/garbage, xm radio, gas for car, ymca, phone, car insurance, groceries, health/medicine, entertainment.
I've canceled all automatic withdrawals and automatic deposits and I deal only with cash now.

I do a zero based budget and whatever is left after all that gets paid gets split in half with half going towards long term savings (we have an account we can put into but can't take out of without penalty for 3 months at a time) and half going towards a general fund. We use that last fund for car repairs, clothes shopping, birthday parties, home repairs, and whatever else may come up. We put the long term savings right in the bank the moment we cash dh's paycheck, and then we just forget about it.

Anyway, back to the envelope system - omg, it's so great. Want pizza for dinner, check entertainment. Want to go grocery shopping, check the grocery envelope. If it's empty then it looks like beans and rice. lol

The envelope system has really helped us break that "feast or famine" mode, we aren't living paycheck to paycheck anymore.

dh and I also have a small allowance ($25 every 2 weeks for each of us), I use mine on going out with my friends or thrift store shopping when it's shopping for "fun" and not "necessity". Stuff like that.

I sometimes get a little nervous about heading to the store with $150 in cash, but overall it's helped me be so much more mindful of spending money than I was when it was all on paper.

[llamalluv]

Originally Posted by sanguine_speed

Because of our lifestyles (busy!) and all, it's not practical for us to have all of the grocery money physically contained within one envelope. Such that whomever does not possess the envelope cannot purchase groceries. We'd end up doing far too much switching money around because someone had to pick something up or whatnot. For instance, last night we found out we were going to be responsible for bringing a particular dish to a family thing today. Well, if the grocery envelope was at home, and we could only use the money that physically came from the envelope, DP would have had to come home, out of his way, and gone back out again for the ingredients we needed.

It seems like you are needlessly over complicating it. The way that the envelope system works in my home is we have envelopes for groceries, entertainment (usually dining out), gasoline, and blow (personal allowance). That doesn't mean that the money sits in physical envelopes at home. DH puts the entertainment, gas, and 1/2 the blow money in his wallet. I carry the grocery money and my share of blow in my wallet. If for some reason I needed him to stop at the store and get something, I would just "pay him back" the $5. Or not. As long as we aren't spending ALL of our grocery money on eating out (or yarn! ) it really doesn't matter how much goes to each cash category EXACTLY.

As for the family dinner thing, if I found out last minute I was responsible for bringing something, I would decide what I was bringing, within limits. (i.e. if they wanted me to bring "a frosted chocolate cake" and I didn't have stuff on hand to make it, I would bring some other comparable dessert instead.)