Can someone explain the cash envelope system for budgets?

[Dr.Girlfriend]

I'm not sure how you decide how much money to have in the envelopes, etc. TIA

 

[maxiesmom]

The amount of money you have in each envelope is the amount of money you are budgeting for that certain catagory for that week.

Say you plan on budgeting $100 a week on groceries. You would put that amount in your envelope labeled "Groceries", and have only that amount to spend. Once it is gone, it is gone. If you have any money left over you can either add it to the next weeks budget as kind of a bonus, or just add however much else would make that envelope equal $100 for the next week.

You should also have envelopes for things you don't pay out every week. For example I have an envelope labeled "Vet" and one labeled "Pet Store". I put $10 a week in each of them, in order to have the money for shots or dog food when I need them.

You will have to do a budget before you start filling your envelopes. The whole idea is to pre-spend your money into the envelopes, and have zero dollars left unaccounted for. That way you are not spending $5 here and $10 there, and at the end of the week wondering where all your money went.

 

[mrsklamc]

If you truly have no clue, track all your expenditures for October, write a budget based on that, and start in November.

 

[Mickey1Fan]

check out this website...

http://www.gailvazoxlade.com/resources.html

Gail has a great interactive budget worksheet. It shows both fixed and variable expenses and provides how much goes into each envelope (she uses jars).

Great budget for myself. I have been using it for over a year.

 

[Dr.Girlfriend]

If you truly have no clue, track all your expenditures for October, write a budget based on that, and start in November.

I understand how a budget works. I have a budget set in place. I wasn't sure how the envelope system worked, and I'd like to tweak out outgoing money a little more.

 

[mrsklamc]

Oh I'm sorry. I thought you were saying you didn't know how much cash to put in each envelope. I also didn't 'recognize' you, i.e. Read your name.

 

[Dr.Girlfriend]

Oh I'm sorry. I thought you were saying you didn't know how much cash to put in each envelope. I also didn't 'recognize' you, i.e. Read your name.

No worries!

 

[angierae]

check out this website...

http://www.gailvazoxlade.com/resources.html

Gail has a great interactive budget worksheet. It shows both fixed and variable expenses and provides how much goes into each envelope (she uses jars).

Great budget for myself. I have been using it for over a year.

Thank you so much for this link. I went and checked it out and adjusted things for myself and I'm going to try that for October. It never ceases to amaze me how much money for things I *should* have when I fill out budget things like that, but I never seem to. Hopefully this will help me figure out where I'm "leaking" money.

 

[mrudman]

The way I do it might not the way most people do the envelope system, but it works out awesome for us.

What I did first is that I went back through our checkbook, wrote down everything that we spend our money on, so that I wouldn't be forgetting something as I was making up the envelopes.

Then I went out and bought an accordian type binder that had the # of slots I was going to need to put the envelopes in.

Turned out I have about 20 envelopes that I fill each month.

Our categories (of course everyone's are different), are car insurance, house insurance, sewer, trash, license plates, doctor copays, prescriptions, nursing insurance, piano tuning, school pictures, psr, zoo membership, gymnastics, newspaper subscription, magazine subscriptions, girl scouts, home repairs, car repairs, christmas savings, and vacation/camping fund.

Most of these bill are either yearly, or every 3 months, so I divided it by 12 or 3 (whatever the case), and put that amount in each month.. so when the bill rolls around, the money is in there. For the categories such as home repairs, car repairs, prescriptions, doctor co-days, or christmas savings... I just made up a # of what I would like to always have in the envelopes and try to keep that in there.. so if I have to withdraw some, I replace it over the next month or 2 (depending on the amount I had to use up that month).

I also set up a natural gas envelope, because our bills vary so much from summer to winter.. so I added up 12 months worth of bills, divided it by 12 (which in our case equaled $120)... so in summer months, I add the difference between the bill and $120 to the envelope.. in the winter months, I take out what I need (over $120) to cover the bill... kind of my own "budget plan" instead of signing up for theirs.

I don't do envelopes for monthly bills... we get paid every other week.. we have 6 monthly bills (water, phone, gas, electricity, u-verse and visa). They're divided so that 3 get paid each time we get paid... then after those are paid, I go clean out our bank account of all the rest of the money... we fill all the envelopes... then all the leftover money is put into a single envelope that we live off of for the 2 weeks.. so when that money is gone, it's gone... luckily we've never run out yet.. think just the thought of paying cash for stuff has helped us back off a little in spending.

 

[Pumba's Truth]

check out this website...

http://www.gailvazoxlade.com/resources.html

Gail has a great interactive budget worksheet. It shows both fixed and variable expenses and provides how much goes into each envelope (she uses jars).

Great budget for myself. I have been using it for over a year.

Her show 'Til Debt do us part is awesome. DW and I watch it a lot. We did the physical Jar system for a few months over a year ago and then drifted from it after a while.

Now we have a virtual jar system that I did up in excel. Very simple but works none the less and we can clearly see where the money is going and how much we have left or where we may have over spent in a certain month.

Each quarter we sit down and do a financial review - adjust amounts if necessary. I know it sounds like a lot to do for the finances at times but we just had our Q3 meeting this past weekend and we are thrilled that we will have the funds for Disney well in advance of our trip. The only reason it's going on the CC is because we are able to get points for the $ and then we turn around and pay the CC off at the end of every month. The money is filtered off from our available funds immediately when a charge is done.

This whole concept was all sparked by Gail V. I may not agree with everything that she says, but she does have some great insights to get started from.

 

[Mickey1Fan]

angierae - you are welcome.

You will see Pumba's Truth and I have both used/use this site. It is great for beginner budgeters (is that a word) and those with experience because it is simple with the interative work books.

Pumba's Truth - have you watched Gail's new show Princess? I'm not as big a fan but it is interesting how much these young woman can be in debt and not know or even care. It was the same for the couples too in 'Til Debt - great show!