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Saturday, February 18, 2012

Envelope System: Month 5

Right off the bat, I HAVE to thank those who have commented on past Envelope posts both here and on facebook.  Thank you for taking the time to share your tips on how to do this better.  This month was SO MUCH easier...thanks to you!

The most helpful tip was about splitting the grocery budget into weekly increments.  It was nice to have money each week and not feel like we'd run out waaayyy too early.  As I mentioned in yesterday's Gala prep post, I even found grocery money I hadn't spent.  Not sure how that happened, but I was glad it did.

I think the envelope system has lent itself to making our new cooking system that much easier as well.  The two go hand in hand.  Eventually, I'd like to be able to hand the kids the cash they will need to buy their groceries with for their cooking night.  As of now, I'm not that organized, but I'm thinking within the next couple months, that might just become a reality.

The Warden LOVES to do our taxes.  He always gets them done and submitted as early in the game as he can.  If we had to pay taxes, I wonder if that feeling would change.  I'm betting it would.  But, because he submitted it early, we have received our refunds, which is a very happy thing.

Sad thing, though, is that both of our cars are in need of brakes.  Ugh!  So, there goes a good chunk of the refund.

I've been nervous to spend the refund on the trip to Disneyland I've been dying to go on with a daughter heading off to college and the unknown expenses there....and now the brakes.  I'm thinking that if we're going to get to go on that trip, I'm going to have to find a way to earn some extra funds.  I've been pondering different options, but I haven't found anything that fills the need.  I'm open to any ideas you might have.

I will write another post about this week's menu plan and share some other ideas for saving money there.

So, I now have a bunch of envelopes that I store away and a few I keep with me for the things I spend on fairly regularly.  It's getting easier to see upcoming expenses and keep an envelope for whatever that expense might be.  I have budgeted for each member of the family's birthday and have evened those out so everyone gets the same amount each month.  I had to take money out of the fall sports budget to even them out and am now shy in that department, so that might just have to be pulled from  the pellet fund since we won't be needing that again until the late fall. That should work out just right.

Tonight during dinner, each of the kids took a turn explaining how they need jeans or socks or underwear, so the clothing budget is as good as spent already.

Oh, and yes, I have a trumpet fund.  I put a larger bill in the envelope every month and have a bunch of $1 bills that rotate each month.  The child has to earn $1 each weekday to pay off the debt.  I look forward to this envelope going away.

It's nice to have school over and not have tuition payments for myself any more.

Still loving this system.  I frequently wonder how we survived without it.  It's so reassuring to know that money's saved aside for the kids' sports and other things that are months away.

At this point in the game, I think I can safely share some pointers in starting an envelope system for yourself:
  1. Go back through a couple months and figure out just what you're spending your money on.
  2. Figure out what things you spend on during the month--groceries, gas, etc.; which things you spend on monthly--utilities and other bills; and which things you spend on much less often--quarterly, yearly, etc.
  3. Even out your bills.  Pay the same amount each month so you don't end up richer on some months than others.  We pay these online.  Our life insurance can only be paid yearly, so that is set aside in its own savings account, but the others--even those that are to be paid quarterly--are now paid monthly in smaller amounts.
  4. Set up envelopes for the things you spend on. 
  5. Use a spreadsheet or even just a piece of paper to figure out just what cash you will need to spend--100s, 50s, 20s, 10s....You get the idea.  Have it all figured out and then go to the bank.  It's easiest to hand the teller a piece of paper with what you want.  Make sure you have totals, so it's all easy to verify.
  6. Immediately after getting the cash, divide it among the envelopes.  It's really easiest if, on the spreadsheet or paper, you have the number of 10s or 20s you're to put in each category, so you can just divide them easily into the envelopes.
  7. Divide the grocery budget into weekly amounts and keep separate envelopes for each week.  I do this with our date money as well.
  8. Try VERY hard not to rob Peter to pay Paul.  When the money's gone in an envelope, it's gone.  Sometimes, when we're in the last week of a month, and the money for medical expenses, for example, remains in it's envelope, I'll dive into it and use it for something we need.
  9. Make sure you share.  The Warden has his own container for cash too, and his cash is divided for groceries, gas, etc. too.  He rarely uses all of his money, so near the end of the month, he'll hand me back the cash, and we can use that in an area where it's needed.

That's what I have for starters.  Hope it helps.  If you already do this, I'd love to hear any pointers you have as well.  Again, thanks to those of you who have already shared.  It's helped so much!


LeAnn said...

My daughter used this system and felt it helped them a lot with their budge. I will have to ponder on this one. Thanks for sharing your success.

Ringleader said...

We use an "electronic envelope" system for groceries only: a separate debit account. We transfer half our budget into the account on the 1st and 15th of the month, and use that card exclusively (or nearly so) on groceries. Has been working to keep THAT particular category more under control.

Lisa said...

I'm trying this again...

Came up with what I hope is more accurate budget amounts by tracking Jan expenses, and have been tracking Feb, to make sure the amounts are good...

So, my hardest items to figure out is things later in the year, less often expenses. Birthdays, holidays, etc. How to plan how many birthdays my kids will get invited to...does she just not get to go if we've hit the limit? How did you do that?

Then, what to do with money left in an area at the end of the month. I'm thinking the budget amounts may be averages, such as, let's say my kids didn't need that much for clothes this month, but next month they all need something...do I just carry it over? or do I move all the extras to a fund set aside for "mini-emergencies" or unforseens? I can see this with groceries too...holidays I do spend more...

Also, what to do about unforseen additions to income (like today we did a garage sale and got a chunk of money, or last week when I got a rebate check from the kids' school?) Should these go into a special fund for "out of normal" purchases?

I'm just so much better with a very specific plan...and not too good at deviating, so I like to have it all worked out in advance, or I'll figure why bother and give up. That's where I've had a hard time before doing this...all the unplanned events...

Julia Shinkle said...

Julie will you remind me if this envelope system is from a book or something? I really want to try it but need to gather more info. Thanks. You can answer me on FB if you want.

Jenn said...

We are planning our trip to Disneyland for next March. What we've been doing is putting money on a Disney gift card. You can put any amount on any time and it will hold up to 1500.00. And the kids are putting some of their chores money on their gift cards especially for Disney. I really need to start some sort of budget type thing for my house. I'm just not as displined as you are :)

Julie said...

I hear you, Lisa. That's been tricky for me too--the unexpected stuff. I've contemplated putting together some kind of emergency cash fund, but I know that some days chocolate is a real emergency, and I'd be dipping into that envelope WAY too often. So, I've got to figure something out.
Julia, I answered your query on facebook. I hope it helps. There are a lot of videos on YouTube about how to set it up too, but they all seemed to be about two minutes long. I have a couple of good friends who've been doing this WAY longer than I have. If you want contact info, let me know. I'm sure they'd be more than happy to help you get started.
Jenn - What a FABULOUS idea! I LOVE it! I think this may just be the answer we need. PERFECT! Can I just get a card online?

Ringleader said...

In my "electronic envelope" system (I do this for more than just groceries, but they don't all have their own account) I roll over money from one month to the next. So if we only spend $10 of our monthly clothing budget that's OK ... I still put in the whole budget the next month. There are definitely months where we spend more than the monthly allotment, but so long as we've under-spent in previous months I know the money is there. It takes a few months to "get ahead" of those spikes, to make sure there's enough to cover the unexpected stuff.

buzygrizz said...

If you get a Disney card, make sure that you can use it for something else if absolutely necessary (or what if someone is lucky enough to overfund it?). Maybe a separate savings fund for the general expenses for the family trip? It sounds like each child would have a card, and that sounds like a motivational place to park their own spending money/contribution.

Julie, I'm interested in what you keep your cash in. Right now I'm using normal security paper envelopes and they're getting ragged. I also had to find a better purse at Goodwill, so I could get my cash out better without the rest being seen.

We start the budget at the beginning of every month (so actual amounts in each subcategory vary each month), and try to keep the total under a certain dollar amount. This month, we did not allocate any money for gifts, but then we got invited to a BDay party for my 6-yr old's friend. We decided to use the "Family Activities" fund since half of our family went. We now have $1.25 left in Family Activities, so we will have to do fun free things for the rest of the month (and maybe get a treat/toy at the dollar store or something, or just carry it over). I am fine with borrowing for similar funds but we don't pull from funds like Grocery to pay for Gifts, etc. Money not spent one month carries over to the next month. This works great for non-monthly expenses (like clothing and activities). For monthly expenses (groceries, etc), if after a few months I consistently have too much then I must be allocating too much - then the money goes to another fund or towards saving/vacation funds.

I like the practice of #1 paying the Lord first, #2 our basic needs (shelter, food, utilities, transportation), #3 yourself (savings, which is a function of income and investment goals), then #4 our discretionary spending which has to be adjusted accordingly with what is left. This happens at the beginning of every month, but it gets takes little time after just a few months because most things are similar. ("Spend every dollar on paper, on purpose, before the month begins" - a Dave Ramsey principle.)

It can be tough, and our family has made some comfort sacrifices because we have an ambitious long-term goal, but we know it will be worth all this effort. We re-evaluate the long-term goal yearly (our "annual budget and goals check-up") and aren't against purposeful changes. We were just tired of missing our goals because we were not really paying attention to the budget (rationalizing borrowing from the future months and not really fixing the problem, etc.), and the cash envelope system really helps us be accountable every month.

Thanks Julie for your tips! And great comments from everyone in all these posts. I'm learning so much!

Jenn said...

Yes you can buy the gift card online@disneygiftcard.com or at most grocery stores.

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