Help me with the envelope plan!

[Mickey'snewestfan]

Between 2007 and 2008 my life will have undergone so many changes that impact my financial situation. All of them are good changes, IMO, but it's still kind of making my head spin.

In 2007 I:

Moved out from my mom's and started paying rent at a much higher rate.

Got a new job that pays significantly more, but causes me to need after school childcare for DS8.

Had my son, who up to this point hated all sports/extracurriculars decide he really wants to play hockey, basketball, and soccer, learn the guitar and filmmaking and take up tae kwon do!

In 2008 I hope to:

Buy a car (which means car payment, insurance, and gas, but also hopefully significant savings in terms of taxis, and changing how I shop)

Adopt a second child (which has no financial upside, but will be worth every penny!)

Anyway, if I am able to add a second child I will need to start budgeting more seriously than I have in the past, and I think the "envelope system" that people talk about here makes sense to me. The problem is that I have absolutely no idea how much to put in each envelope, up to this point I have made enough that I simply making frugal choices when I could worked fine, but now I'll have daycare which will probably push me into needing to really budget.

Anyway, can people give me a sense of what their envelopes contain. To give you a sense of where I am financially, with one parent and 2 kids I'll probably have about $1,000 a month left over after the following have been paid:

rent
utilities (only internet, phone and cellphone everything else is included in rent)
health, dental and vision insurance
car payment
car insurance
retirement savings
aftercare/daycare/summer camp for both kids
2 after school activities at a time for DS1, none for the new child, who I am hoping will be too young to want them

What other categories do people have in their budgets? Food, gas, emergency fund, entertainment? What am I forgetting?

Also, I'd love to hear strategies people use for keeping their spending low.

Thanks!

 

[mom2cinderella]

What am I forgetting?

• Gifts (birthdays, Christmas, etc)
• Clothing
• School fees/incidentals

Those are all I can think of!

Also, I'd love to hear strategies people use for keeping their spending low.

For me? STAY OFF THE INTERNET!

 

[CarolA]

I am sorry but I am not a fan of the envelope system.

If you home is broken into and someone steals the envelopes you are OUT of luck. Homeowners and/or renters insurance will only pay a few hundred max regardless of how much you had stuffed in those envelopes. I would not keep more cash in my house then I could afford to lose. (And I don't even see renters insurance in that list)

 

[Mickey'snewestfan]

I am sorry but I am not a fan of the envelope system.

If you home is broken into and someone steals the envelopes you are OUT of luck. Homeowners and/or renters insurance will only pay a few hundred max regardless of how much you had stuffed in those envelopes. I would not keep more cash in my house then I could afford to lose. (And I don't even see renters insurance in that list)

I wasn't actually assuming that there would be actual money in all the envelopes, at least not all the time. For example, if I budget $500 for groceries and I go 4x per month, I figure I either take $125 out before each trip (and put it in the evelope then) or I just make a mental note to spend less that $125, and force myself to stick with it.

I can see sticking $50 in an envelope at the beginning of the month for things like a cup of coffee that are hard to keep track of.

Oh, and yes I forgot to figure the renter's insurance into the calculations.

OK, so now I have:

Renter's insurance
Gas
Food
Clothing
Incidentals (e.g. school supplies, field trips)
Entertainment
Emergency Fund
Gifts

How much do you put in each (imaginary) envelope? That's really my question.

 

[wulfgeat]

We actually purchased a fire proof safe. I think it was a couple of hundred dollars. We use it to store tax documents and some photos. The envelopes that we do are stored in the safe. This is not a lockbox. It is a safe. It could be stolen out of our house, but it would be a more than one person job and you would have to load it immediately in a vehicle or definitely stand out going down the street. We currently do envelopes for groceries and eating out. We are considering it for clothing. We have chosen those categories because they were the ones we were most likely to go over that we spent on regularly.

For two adults we do about $75 per week for groceries. My wife does a low sodium diet so it costs more to buy it seems like. We do $40 per week for eating out. Clothing is up in the air for now. Last year we spent way too much, but I had to replace my wardrobe as I lost several sizes. We also budget for tithes.

You may be better off just trying to track your spending for a month or two to see what you are currently spending and then go from there. One other thing we do is budget not by month but by 4 week periods. That fits with our pay schedule. One advantage is 13 budget periods per month. That means for your car you can make one extra payment a year if you are focused on debt reduction

 

[Disneyoverload42]

Here is my budget and this is by priority, if you are too far down and it's a short week for some reason, you may not get paid... the ones with * are "envelope" categories:

Housing - for us this is both rent and mortgage (it's complicated, but we have both) our insurance & taxes are escrowed

*Groceries - this is school lunches, groceries, household items (because I buy them when grocery shopping so it is easier to figure out), dining out.

*Gas - (if something like oil changes are needed, I stick it under this one, rather than cash, we use walmart or Meijer gift cards - usually get a discount at the pump with it.

*"Blow" money - this is our "allowance" we each get about $10 a week we don't have to account for - coffee, a lunch whatever

Daycare

Utilities

Debt - loans, orthodontist, etc.

Personal care - haircuts, personal items

extracurricular activities for the kiddos

Subscriptions


we also have "slush" funds for things we know are coming up through the year - like school registration, car registration, gifts, insurance deductables, etc. we divide the amount by 52 or 26 and that is how much goes into that ING account each week or every other week

I don't include certain things in my standard budget, but I will throw them in every now and then - like clothing.
Because we get paid every week, (me one week, DH the next) I actually do my budget weekly rather than monthly. With 6 people, things are subject to change daily.

As for getting robbed, I do my shopping on Friday, the same day we get paid. I go to the bank, get the money out and buy my stuff right after... the most I ever have in any envelope at any given time is $75 in Gas & Grocery money right before I walk into the store and maybe $10 after I walk out. But I did use my debit card at a fast food establishment and had my bank account compromised to the tune of $500+ so I'll take my chances with cash.

 

[Disneyoverload42]

forgot to add - right now we have no entertainment budget... and we just have our regular emergency fund funded and aren't adding to it until we are done with debt...

 

[scrapquitler]

Keep in mind that you should also purchase TERM LIFE INSURANCE.