Tell me about the envelope system

[Mellie2162]

I second the using a calculator at the grocery store. I started doing this about a month ago and it really helps me stay on track. Also instead of just wandering around the store as I go, I sort of have an idea what I want for dinners. The first thing I do is go to the meat counter and buy my meats for dinners that week, then I buy the rest of my stuff. It really has saved me from having to make trips to the store in between.

 

[MrsPooh]

The envelope system has been working great for us.

At the store I actually keep a notebook and manually add the total as I go, I found that when I used the calculator I would accidently hit a wrong button and lose my total so a handwritten one works better for me.

We do envelopes for everything right now since we are really struggling. I carry the grocery one with me all the time. Dh and I each get a small set amount for ourselves so that is alone in my wallet. I also do one for my daycare (pay a friend cash), one for dr co-pays, one for dh's prescription co-pays, one for clothing, one for occassional eating out, one to save for property taxes, one for gifts, etc....

We do the gasoline a bit differently. We know about how much we will each need for gas each week. I get the cash from the bank and then go to the gas station and have the budgeted amount put onto a gift card for each of us. The gift cards make it easy to pay at the pump and we don't "accidently" spend the money on something else. It also helps because if I know the gift card is empty and I'm running low on gas I'd better stop driving anywhere except required places (school/work) until we get paid again. It has helped me eliminate unnecessary driving.

I love using the envelope system because I know exactly how much there is to spend and I don't have to worry about if it has been spent out of the checkbook before I needed it.

 

[strasfamily]

The envelope system has really changed the way we handle our money and I wish we would have done it sooner!

We also use the gift card idea for our gas, but we go to Sams or Costco and put money on one of their cash cards since they don't take cash at their gas pumps.

 

[richmond282]

Here is the website we used to help w/ our budget planning.

http://www.crown.org/Tools/

It basically uses a certain % of your salary for each category and then you tweak it from there.

 

[bubba]

We started using the envelope system last month and it has been wonderful ! If it's not in the envelope, we can't spend it. Sounds simple, but it made a huge difference for us last month. We have envelopes (actually zippered flat pencil cases from the $ store that we keep in an accordian file) for groceries, gas, entertainment, kids school (field trips, pizza days, etc), and lessons (guitar and swimming). The only issue that has cropped up is the gas thing. DH now will grab $ out of the envelope when he's at a 1/4 tank and fill up then rather than waiting til the empty light comes on. I also keep a general running total in my head when grocery shopping. I'll estimate - 1.25 I'll round down to 1, 3.78 I'll round up to 4 and it all seems to work out. I shop once a week, then end up going back another time each week for milk. I am a definite convert to the envelope system ! I should mention that really the only problem I've had ig getting DH to remember to put the change back in the appropriate envelope !

 

[Chicago526]

We don't do the envelope system, but we do track our spending to the penny by using Quicken. We charge just about everything and pay it off at the end of the month. My credit card info downloads straight to Quicken, so every morning I do a download and see what posted overnight, I don't need to wait for the statement in the mail to find out what we've spent, or enter it by hand from a receipt when I get home from a shoping trip. I can then run a report to see what we've spent so far each month for each catagory, and I can instantly see if we are approching our limit for each catagory or if we've still got some money left. Since we pay off the CC every month in full, we are very carefull not to go over, otherwise we'll be short and won't be able to pay the CC in full! The only thing I don't use Quicken for is to make the actual budget, I use Excel for that as I find the Quicken budget builder program dificult to use for some reason.

It works for us because we are pretty disaplined with the CC's, we don't do much in the way of impulse buys. But for somone trying to break the CC habit, I can see how going to strictly cash would be a great way to start to learn how to budget. At the end of the day though, the best system is the system that works for you and that you stick to.

I find the biggest budget busters to be the "once in a while" bills, like yearly car registration. The "once in a while" bills are easy to forget about and when they pop up, they can throw a monkey wrench into the works. When you set up your budget, try and go back in to your bank records for the last 12 months to try and find all those unusual expenses so you can plan for them ahead of time. If you can't go back that far, try to have a decent cushion in savings so you'll have the money (or most of it at least) when those expenses roll around again.

 

[Golf4food]

I find the biggest budget busters to be the "once in a while" bills, like yearly car registration. The "once in a while" bills are easy to forget about and when they pop up, they can throw a monkey wrench into the works. When you set up your budget, try and go back in to your bank records for the last 12 months to try and find all those unusual expenses so you can plan for them ahead of time. If you can't go back that far, try to have a decent cushion in savings so you'll have the money (or most of it at least) when those expenses roll around again.

I put all of those items into our budget - so our vehicle registration is about $60 for each vehicle in June so I just have an item for $5 per vehicle ($10 total) added to the amounts I put in our online savings account each month so that after each 12 month period that $120 is saved up and I just transfer the money out of the online account to pay the bill and start over again the following month. This works well for all yearly bills - vehicle registrations, city fees that are billed separately, Disney season passes...

I do all of our budgeting in Excel in a spreadsheet that I have setup basically as an envelope system, I just don't like having cash or carrying cash around.

 

[macaronigal]

She is awesome! I read her web-site every day to see what she has to say on her blog. She is super insightful and straight to the point.
We use actual envelopes and take them with us only when we go out shopping, each envelope has a sheet to record how much was spent and thus a running total.
You can go on the website and she explains how to figure out how much money each envelope (jar in her case) gets depending on how much your monthly NET income is and how much your FIXED expenses are.
As for the person who asked about carrying a credit card - I absolutely still do and a debit card too. We don't have a problem with over-spending and were not in debt when we started this, it was a way to be more conscious of our spending and to force us to put more away. I don't want to find myself being towed to a repair shop with no way to pay for anything!!
Good luck to everyone who is thinking of doing the envelope system - you are on the right track!

 

[Irin997]

Ok, so I wanted to post that I've been doing the envelope system for about a week or so now and it is going ok. However, there have been a few "surprise" expenses that I've had to use my debit card for like a program for one of my college classes. But one thing I'm really trying to stay under budget for is groceries and household items.

BTW, I LOVE the idea of the zippered pencil cases. Esp since they are on clearance at Target right now! Maybe I'll go check today!

Anyway, I went grocery shopping with DD7 and gave her the task on entering all prices into the calculator for me. She LOVED it!! She always wants to help at the store so this was perfect for her.

Basically I just kind of need to tweak how much to pull out of the ATM every pay period and how much to allot into each envelope (and how I want to divy up the system).

Currently I have three envelopes: groceries/household (includes grocery store and Target purchases, etc), gas, and entertainment/clothes/fun/misc. I will probably add a kid's school one (great idea cause those things add up....pizza money, field trips, teacher gifts. I'm also thinking of adding a kid's Bday present one for all of those birthday parties we have to go to.

 

[bubba]

Irin997 - Way to go ! Good for you for getting started. We've found the first month or so was our time to work the 'bugs' out of the system. It's amazing the expenses that crop up that you didn't think about when you first sat down to create your budget. I have tentatively included kids bday party gifts in the 'Kids' envelope. Not sure how this is going to work out - We started the budget in August and around here there are few parties during the summer. We still put our $ in the envelope last month though, so we have 2 months budgeted kids money in the envelope in time for school starting (and pizza days, field trips, birthday parties ...) I think I'm babbling - apparently I haven't had enough caffeine yet this morning ! I'll come back later and read this and cringe seeing how little sense I made ! Have a great day everybody !

 

[Piglet843]

I've been interested in doing this but I have some concerns.
When you say you store these in a "safe" place - where might that be?
My neighborhood and even the whole city has been attacked by daytime robberies lately and frankly its scary. I'd hate to know that a month's budget worth of cash was stolen along with all my valuables.
You've seen the show "It Takes a Thief" - they know where your "secret hiding places" are.
Does anyone have any ideas about maybe a virtual envelope system or something a little more secure than a bunch of cash laying around the house in envelopes?
I'm sorry I just don't trust that....

 

[Karenj2]

I posted earlier in this post about the budgeting program I use, which basically is a virtual envelope system. It's called YNAB (www.youneedabudget.com)

In fact, if you do a search on YNAB on the budget board forums, you'll probably see my billion postings about it - I love that program!!

 

[bubba]

Piglet 843 - If you're concerned about security and don;t want to keep the cash in the house, you may need to be a little more disciplined as you'll be using debit cards or credit cards. How about creating a spreadsheet, or even just use paper and pencil to breakdown how much you have to spend on the 'envelope' categories each month. For example, I would use 1 page per category, note the category and monthly budget at the top. Then, each time you make a purchase in those categories, note the total on the receipt and the remaining budgeted amount. For example, you have a $500 grocery budget. A trip to the grocery store costs you $115. Note the $115, do the subtraction and note that you have $385 left. If you do a running total, are disciplined about writing everything down and don't get carried away with the spending (I find it easier to overspend with my debit card as opposed to using cash) you can do it ! Also, don't forget if you use a credit card to pay for groceries or gas, pay the bill in full when it comes in from the budget $ you have in your account. (Boy, I hope this makes sense !)
Good luck !

 

[Irin997]

Actually my purse is big enough so I carry the envelopes around with me. Granted, they are not super full either, but I don't want to get stuck without cash when I'm out of the house. Of course I could always just whip out my debit card but the point is not to do that!

 

[Shmily1]

I want to start doing this next week when I get paid so I am concentrating on what envelopes I need and how much to put in each one. I also have to figure out what to do about DS18 and DD17. DS goes to college and will need spending money, gas, extra food, etc. It's his first year so we are still figuring out the spending thing. DD is a senior in HS and she needs food money, gas, all the senior expenses, not to mention the senior cruise, etc. Any ideas? How do you go about figuring out how much for each envelope?

 

[Irin997]

I want to start doing this next week when I get paid so I am concentrating on what envelopes I need and how much to put in each one. I also have to figure out what to do about DS18 and DD17. DS goes to college and will need spending money, gas, extra food, etc. It's his first year so we are still figuring out the spending thing. DD is a senior in HS and she needs food money, gas, all the senior expenses, not to mention the senior cruise, etc. Any ideas? How do you go about figuring out how much for each envelope?

From my initial experiences you have to figure out not necessarily how much you NEED but how much you WANT to spend. For example, my budget is very small so my per pay period take out of the ATM is $140. I have $60 for groceries/household, $60 for gas, $20 for entertainment/misc. I will be adding a kids school expenses envelope and am considering a small maybe $5 for birthdays envelope.

I knew that I wanted to CUT my grocery bill. I figured out how much I was currently spending and how much I'd rather be spending. So I'm trying out $60 for a two week period. So far so good. I spent $35 at the grocery store on Sunday. After this we'll just need staples like milk and bread until I get paid again.

Same thing with gas. This amount will probably have to go up though....we'll see how it all works out though.

Etc, etc.

If you find you need to add envelopes, as I have found, add them in and allot a certain amount you want to put in there every pay period or every month (however you're doing it). If you need to adjust it next time, do so!

In your case, give your college student a budget and make him stick to it. See how he does and try and get him to keep track of what he is actually spending him money on. If he is spending it on the right things that's great but if he is spending it on frivilous items, then that's another story.

Keep us posted!

 

[tonilea]

I've been interested in doing this but I have some concerns.
When you say you store these in a "safe" place - where might that be?
My neighborhood and even the whole city has been attacked by daytime robberies lately and frankly its scary. I'd hate to know that a month's budget worth of cash was stolen along with all my valuables.
You've seen the show "It Takes a Thief" - they know where your "secret hiding places" are.
Does anyone have any ideas about maybe a virtual envelope system or something a little more secure than a bunch of cash laying around the house in envelopes?
I'm sorry I just don't trust that....

We thought the same thing. Then realized we have a gun safe. lol

We don't actually keep an entire month. I have it broken down by pay check and say we spend $400 a month on groceries and DH gets paid twice monthly that is $200 out of each paycheck. You could even break it down weekly and withdraw $100 from the ATM to take to the grocery store. Of course you will have to do it with all your catagories.

I do what is called an allocated spending sheet for each month that shows what is coming out of each paycheck and where it goes.

 

[tonilea]

Piglet 843 - If you're concerned about security and don;t want to keep the cash in the house, you may need to be a little more disciplined as you'll be using debit cards or credit cards. How about creating a spreadsheet, or even just use paper and pencil to breakdown how much you have to spend on the 'envelope' categories each month. For example, I would use 1 page per category, note the category and monthly budget at the top. Then, each time you make a purchase in those categories, note the total on the receipt and the remaining budgeted amount. For example, you have a $500 grocery budget. A trip to the grocery store costs you $115. Note the $115, do the subtraction and note that you have $385 left. If you do a running total, are disciplined about writing everything down and don't get carried away with the spending (I find it easier to overspend with my debit card as opposed to using cash) you can do it ! Also, don't forget if you use a credit card to pay for groceries or gas, pay the bill in full when it comes in from the budget $ you have in your account. (Boy, I hope this makes sense !)
Good luck !

Your suggestion makes perfect sense and should work, but it doesn't for everyone. I will spend over if I have plastic. Maybe just a few bucks, but if I have the cash, I can't overspend. KWIM?

 

[momlificient]

I don't use a physical envelope system, but I thought I'd bump this up to the first page again for you. (I use YNAB Pro - www.youneedabudget.com - it's a budgeting program.)

Do you think it is worth the $50? Very curious about this program

 

[bubba]

Tonilea - ABSOLUTELY I know what you mean ! That's why I go to the bank twice a month to take out our envelope amounts for the fortnight. If I take my plastic, I'd have my budget messed up in no time. I only suggested the plastic idea as security was an issue. Also, I think with the plastic, you'd have to be very rigorous in writing down EVERYTHING and only using it for the things that fall within your budget. I certainly couldn't budget like this - I need the accountability of having the cash with me. Knowing if I'm going grocery shopping on the 24th and I only have $75 to last me til the end of the month, $75 is all I can spend.