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Posts tagged with: money envelope system

Budgeting = A Work in Progress

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Before blogging here, I’d had a budget but I’ve mentioned that I didn’t really “stick” to it very well. Basically, if I wanted to buy something (within reason) I would just do it…it didn’t really matter if I was already over budget for the month.

I’ve been trying to modify this behavior (through use of the money envelope system). But if there’s one thing I feel I’ve learned since starting this debt reduction journey, it’s that the budget is like a living, breathing thing. It needs to constantly be monitored and adjusted as necessary to work well.

To jog your memory, here was my previous budget (notice the new line-item for my gym membership):

Item Budgeted
Rent $1055
Electricity $150
Water bill $75
Gas bill $25
Sprint (2 lines) $115
Cable/Internet $85
Car Insurance $90
Health Insurance $350
Waste Management $35
Debt $1500
Gym $50
Miscellaneous $250
Groceries $380
Baby Purchases $600
Gasoline $100
Savings for Irregular Purchases $265
Total: $5125

There are a couple categories that I want to revise moving forward. First, I’m going to have to bump my grocery budget back up to $400. This is what it had been set at before I started blogging and I was hopeful to reduce this number but have failed every single month. Instead of continuing to beat myself up about it every month, I’m going to set the budget at a more realistic number for our family. Back to $400.

 

The other changes all have to do with savings.

 

Here was my old break-down of savings:

$40 for semi-annual fees (car title/registration fees)

$50 for car maintenance (oil changes, savings for new work truck)

$125 for dental/vision (just increased from $50 last month)

$25 for travel and Christmas

$25 for 3-6 month expenses

 

And here are the changes I want to make:

Increase the semi-annual fees savings to $45/month. My “semi-annual” fees were only calculated to include annual car registration costs. Just the other day I got a $50 bill to renew my Costco membership. Oops. So I’m adding the $5/month to cover this expense (and provide a small buffer).

I’m starting a savings for veterinary expenses of $10/month. This came up because our dog (who is like our first “child” – you can see him in my author photo with me) got extremely sick this week. Luckily he pulled through, but my fear at the thought of an emergency vet visit made me realize…we need some type of funds for this. The reality is, our dog is getting old (major sad face!). He turned 9 this year, and he’s a large dog (large dogs tend to have shorter life-spans than small dogs). I hope he’ll be with us for years and years to come. But the fact is that we may need to have some money set aside for eventual vet expenses for old dog problems and end of life expenses (breaks my heart to even say that….but it’d be unwise to ignore the realities of life). Note that his food and regular annual check-ups will continue to come from the “miscellaneous” budget, so this is more of an emergency savings for unanticipated vet bills.

I’m starting a small savings for baby birthday expenses of $10/month. I was conflicted on this one. If I’m going to save for the girls’ birthday, why not also start a savings for all kinds of gift-giving occasions (like family birthdays, shower gifts, etc.) But the dollar amount spent for those is much less, so I think those should continue to come from my “miscellaneous” budget. I could perhaps even reduce the miscellaneous budget since I’ll be appropriating money monthly for all types of expenses that would otherwise be paid with “miscellaneous” funds. I want to monitor this for a month or so before officially deciding whether to lower the miscellaneous budget.

And one last (relatively big) change: I’m going to start setting aside $100 monthly with the intention of eventually investing in a Roth IRA. Per this conversation when I paid off our credit cards and started contemplating the need for retirement savings, the majority of commenters said we should NOT wait on this until we’re completely debt-free. But, I also want some time to do research into different options with different places and feel comfortable about where we invest. In the meantime, it’s easy for me to open a sub-account of my Capital One 360 online savings (<refer a friend link) titled “savings for 2014 Roth IRA.” I will probably stash some money there until the new year (I hadn’t known before people commented, but you can fund a 2014 Roth IRA until April 15, 2015). Then sometime probably in the March time-frame I’ll open up a Roth and make a large contribution (not just the money saved here, but probably adding some surplus funds from February and March, too). I’d love to max out our contribution at $5500. My savings by that time will only amount to about $900 (in March 2015), so I don’t know if we’ll be able to scratch up enough surplus funds to hit the $5500. If I were to set the money aside monthly ($5500 divided by 9 months = $611/month), it amounts to more than I feel comfortable saving right now. Ultimately, this is not a savings/retirement blog….it’s a get out of debt blog. I do feel that there’s a place for retirement savings and it’s an important component of the conversation, but I still have so much debt to focus on that I don’t want to be saving at that level while I’m still trying to shovel my way out of debt.

These changes bring our monthly savings to this:

Monthly Savings

$45 for semi-annual fees (car title/registration fees & Costco membership)

$50 for car maintenance (and savings for new work truck)

$125 for dental/vision

$25 for travel and Christmas

$25 for 3-6 month expenses

$10 for baby birthday expenses

$10 for veterinary expenses

$100 savings for 2014 Roth IRA

Total Monthly Savings: $390 (up from $265/month)

 

Even seeing that amount of money (nearly $400/month) go to savings instead of toward debt kind of hurts. But thinking long-term, having these savings are going to help me prevent accumulating future debt when the unexpected arises. Also, there’s no law that this money has to stay in savings. If, for instance, we build up the veterinary expenses savings and never use it or have no need for it, of course this money can be used toward debt (or toward the 2014 Roth IRA savings, or whatever else we like). But it gives me great peace of mind to have everything accounted for like this.

 

So there you have it, another revised budget. Hopefully the next revision I make will be to reduce the amount appropriated toward “miscellaneous” and increase the amount toward debt. Here’s hoping!

Updated Budget

Item Old Budget New Budget
Rent $1055 $1055
Electricity $150 $150
Water bill $75 $75
Gas bill $25 $25
Sprint (2 lines) $115 $115
Cable/Internet $85 $85
Car Insurance $90 $90
Health Insurance $350 $350
Waste Management $35 $35
Debt $1500 $1500
Gym $50 $50
Miscellaneous $250 $250
Groceries $380 $400
Baby Purchases $600 $600
Gasoline $100 $100
Savings for Irregular Purchases $265  $390
Total: $5125 $5270

What do you think about my planned monthly savings? Is there too much or too little to each category? Are there any other categories you would suggest to include or any you would exclude?


Money Envelope Update, Part 2

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Hi all! Who else was doing Money-Envelope June with me? I wanted to check in briefly and see how its going! After my mishap early in the month, I haven’t had any more issues (thank goodness!) But I still stand by my statement that the money envelope system may just not be for me. Even with all the benefits (which, I reported last month to outweigh the negatives), I just can’t get over the bulkiness, the inconvenience, and the simple fact that….I don’t like to use paper money! Commenter Mary did point out some valid reasons why dollar bills can be safer than credit/debt cards but, for me, I think I prefer the plastic. So many of you commented on trying You Need a Budget that I decided to check out the website and….I’m intrigued. I don’t really want to shell out the money for it, but I’ve also seen other blog writers (who are not endorsed by the YNAB) talk about how life-changing it was, how its worth every penny, and this means a lot given their frugal nature, etc. etc. etc. So I’m thinking that in July I may try the free 34 day trail that they have advertised on their website. It would give me a chance to use it for a full month and see what I think before committing. Users of YNAB – what do you think? I obviously haven’t downloaded the software yet – is it a huge time-investment up front to get everything synced with the software programs? This makes me a little nervous since we’ve decided to go visit my Dad out-of-town for 4th of July. Will I have time to set everything up before leaving town (we’re planning to go for a long weekend, from Thursday July 3rd through Sunday July 6th). How long did it take you to get everything organized when you started? The trial is for 34 days (as opposed to 30 or 31), so I could start it at the end of June and try to get it set up before July starts. Just trying to figure out the logistics of that. Would love some insight from those who use the program. Prior to the money envelope system I’ve just tracked all my expenses in an Excel file. We did mostly “okay,” but there was some overspending here and there, which is what the money envelope system has helped to curb (mostly…unless I forget the dang envelopes!) I do feel like using the envelopes has made me more cognizant of my spending so, in some regard, I think/hope I could return to the excel file and bypass the overspending since I am now more aware of my spending. But I’m not opposed to trying other systems and YNAB seems to have a lot of strong supporters. What other budgeting systems do you use? Would your recommend any (or recommend to avoid any)?


Oops! It happened again!

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By this point we all know my love-hate relationship with the money envelope system.

Well I am so fed up right now I think I might be over it….

At the beginning of the month I withdrew money and carefully stuffed each envelope. It’s still early in the month so I KNOW I have only made 3 transactions so far (1 from the “eating out” envelope and 2 from the “groceries” envelope).

Well this morning, for whatever reason, I was counting my money and….

….I’m $40 short in my groceries envelope!!!!

ARGH!!!!!!!!

Remember this happened last month, too, but I chalked it up to me forgetting a quick grocery store run. But this time we’re not even a week into the month so I can remember every purchase I’ve made and I KNOW 100% I did not spend that $40.

I know my husband wouldn’t “steal” from our envelopes, but I called him anyway, fingers crossed and hoping that he had needed to “borrow” a little cash (since that’s the only thing that would explain it).

No such luck. Husband hasn’t touched the envelopes and was somewhat offended I would even suggest he had “borrowed” from our family’s money.

Soooo, I’m pretty sure I lost it.

I know for sure that the envelope originally had the correct amount of money. I even counted after my first grocery store trip and everything was accurate.

But this most recent trip was at Walmart. Remember how I use my money envelope for holding coupons, too? I remember distinctly 2 separate times when I had paused to dig through my envelope and make sure I had a coupon for the item I wanted to put in the cart. I must have somehow dropped money at one of those times. That is the ONLY thing I can think of to explain where this money has disappeared.

Regardless, I am pissed. I’m pissed at myself, at the stupid envelopes, and at the world. I know it sounds childish, but I’m really, really upset. $40 amounts to basically half of a week’s worth of groceries. That’s a significant amount of money right now.

So I’m calling it quits. I’m done with the envelopes. The whole purpose is defeated if I keep loosing money.

Update:  I wrote this on Thursday morning and on Thursday afternoon I found the “lost” $40. Turns out…I’m an idiot and had written the wrong amount for my Walmart receipt so the numbers didn’t match up when I was balancing the envelope because I was “off” by $40. 

Sorry for cursing you, world! Also – I stand by the fact that the envelope system (at least in its paper format) may not be for me. Some readers had suggested mint.com and various apps that could be used. Perhaps that will work better for me. I’ll continue on the rest of the month with the paper envelopes but this will be the last month, for sure. Clearly I am too irresponsible dumb to have so much cash on me!

 


Money Envelope Update

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First I’d like to say happy Memorial Day to all! I hope you have an opportunity to spend the day with your loved ones! Thank you to all who have served, are serving, or are spouses/family of Service Members. I don’t know how you do what you do, but I am so thankful you find a way!

Remember how I decided to do a “Money Envelope May” challenge? I had intended to do an update post mid-month with how it was going, but time got away from me (or I had more pressing things to blog about), so now that the month is nearly over I decided I’d just do a wrap-up with how it all went and my impressions.

I started the month with 5 money envelopes:

  • Groceries = $380
  • Entertainment = $20
  • Eating Out = $75
  • Personal Maintenance = $20
  • Other = $125

I was not thrilled about the idea of money envelopes. When I first wrote about it, I talked about how I thought they are bulky, annoying, and just a big hassle. Now that I’m about a month deep in using them I’ve given my personal pros and cons below:

 

CONS

  • I still find them to be bulky. I am used to either NOT carrying a purse (just throwing wallet and phone into the diaper bag), or carrying a tiny purse (I have too much baby stuff to carry for me to deal with wrangling a big purse). When I started Money Envelope May I had to bust an old (larger-sized) purse out of my closet because the envelopes simply wouldn’t fit into my smaller purse. How men (or women who do not carry purses) do a money envelope system????? I have no idea.
  • You have to be very careful with balancing your envelope (like balancing a checkbook). I have never been great about this, which is why I LOVE debit cards. I know I have roughly “X” amount in my account so I can go to the store and not worry about the exact amount because I know I can always look it up later online. Not so much with a cash-only system. I thought I was diligently “balancing my envelope” (I don’t know what else to call this – but basically I was tracking my spending and how much money is leftover on the outside of my envelope….writing straight on the envelope)….but somehow I must have messed up. The only envelope that gave me a problem was “groceries.” Last week I noticed that I must have forgotten to write down a purchase because my envelope said I should have $105, and instead there was only $88 inside. I racked my brain and could not for the life of me remember where else I’d made a purchase. I know it must have been my mistake (not me misplacing money or something), but its still annoying to feel like I just “lost” $17.
  • I worry about the money getting lost/stolen. This was particularly tough the first couple days, as the envelopes feel very awkward and bulky. I was SURE I would drop an envelope full of cash or someone would reach inside my giant purse and steal it without me even realizing. I also had random fears that someone would see my cash-laden envelopes and try to rob me in a parking lot while walking out of a store. I feel much more protection with a piece of plastic because if it gets lost or stolen I can simply call the bank, have a hold placed, and get a new card issued. There’s a sense of security to it all that I lack with cold hard cash.
  • Annoying for online purchases. I wrote a post about how I got a “free” (paid $2.99 for shipping) beauty box last week. That $3 came out of my “personal maintenance” envelope….but I had to pay for it online. The way I handled any such purchases (e.g., I also paid for a couple itunes songs), was to remove the money from my envelope and put it in my wallet. Since I wasn’t using my wallet for spending, the money was basically stored safely there and when I got around to it I would deposit it back into the bank. It’s a little bit of shuffling, but not too bad.

PROS

  • Useful for storing receipts and coupons. Clearly I still had a problem with my “grocery” envelope, but I wasn’t storing receipts at the time (though I’ve started since then). But one thing I really liked the envelopes for was storing coupons!!! I’m not a big couponer, but I do clip the occasional coupon. There is nothing more annoying than going to the store, wanting “X” product, and realizing I have left my coupon at home. Argh!!! Or how about actually getting the coupon, shoving in purse, and somehow having it lost or forgotten about by the time I’m checking out (this has literally happened multiple times). Now when I make a grocery list, I see if there are any coupons I want to use and tuck them safely inside my money envelope. It’s ideal because then the coupons are stored safely together instead of getting crumpled, torn, or accidentally tossed out. And they’re right next to my cash so I don’t forget to use them when I’m checking out (The Worst!)
  • They curbed my spending. They really did help me cut back on my spending! I was surprised because I really wasn’t expecting for there to be that much of a difference, but simply being very cognizant about my spending and where my money was going helped me to cling to it a little tighter. Times when I might have been tempted to throw that extra item into my cart, or to grab an afternoon “happy hour” soda from Sonic, I was able to resist because I knew I was trying to spend less. And it worked. Isn’t this their primary purpose?

Sooo, I guess I have a lot more “cons” than “pros.” I hadn’t intended it to be that way, but this is my honest opinion. Even in spite of the plethora of cons, the money envelope system WORKED for me! Because of that one simple fact, I think I’m going to keep the money envelopes around for another month. I still prefer plastic over cash, but I think I need to get a couple months of cash-only spending under my belt before I revert back. Clearly they helped me curb my spending and that has been my goal, so there’s nothing bad I can say about that!

 

Have you ever tried a money envelope system? Want to join me for Money Envelope June (not quite as catchy as Money Envelope May, lol)?