Envelope Budget System

[lfw]

I have tried to do the envelope budget system (an envelope for groceries, entertainment, Misc expenses etc...) and failed at it. By the time the weekend had arrived I had to pull some money from the groceries to pay for something else. I ended up taking more money out of the bank too to cover for the envelopes I took out of.

Does anyone have any tips on how to make it work better?

Also, how do I handle the bills that I pay for with a check with the envelope system?

[JanH]

Maybe you should start with just a few envelopes until you get an idea of how much you need to put in each envelope. Then you could gradually expand the system, including all those you need. You might not be putting enough into each envelope for your needs right now. You could always go smaller in the future as you spend less, or put the extra into a savings account at the end of the month. The guys on here say it works best if you don't take from one envelope for another. That is why I'm wondering about putting enough in each. Any time I try something that I find here, I have learned to implement in slow degrees because I overwhelm myself. I am in the process of doing some new things also.
Good luck!

[tinapbeana]

i use a modified 'virtual' envelope system, but i think it might be one of those things that works for some personalities and not for others.

for me, i get a weekly allowance, grocery money, and a household allowance in cash every week out of my checking account. when the cash is gone, it's gone, but i get more the next week and there's very little i can't wait a week for. DH also gets an allowance.

all the other money is either in my checking or savings account as one big lump, but i keep track of what money is alloted for what on my computer. so, my savings account might say $2000 but my computer tells the rest of the story: $700 is for house taxes, $240 is for car taxes, $300 is for homeowners insurance, $75 is for the water bill, and the rest is savings. same thing for my checking account and the bills that are supposed to come out of it.

now, whenever DH is with me on my weekly ATM run he gets a receipt of the transaction (unnecessary!) and says "we have $1800 in checking? is that real or no?" of course the answer is NO: that money is alloted for bills, groceries, and allowance! that's where DH and i differ: if he sees $1800 in checking he's off to spend it. i take that number, subtract what has to be paid with it first, and then look at what's left...

[Broken Arrow]

Welcome to the forums, lfw.

The envelope system is only a physical means to keep track of money. It in itself will not keep the money safe from yourself. Unfortunately, that is something that is entirely psychological. Um, I don't know why you had to pull money out of the envelope to pay for something else. Was it important?

In any case, there are two things you would have to do, but I think they're both fundamentally important. The first is that, psychologically, you must be fully committed towards wanting to maintaining your budget. If not, then no matter system you use, it won't last for long.

The second thing is to review your budget again. When you have to take money out of one fund to pay another, it's generally because your budget is larger than what you're bringing in. I would see where things can be cut back to make it fit and live within your means.

At the very least, the envelope system has revealed this critical insight into your current financial situation, right? And knowing that is an important diagnoises to your financial health.

That is not to say that it wasn't important. (Perhaps taking money out of one fund to pay off something that's even more pressing.) I don't know. Whatever it is, I wish the best in getting your finances under control.

[lfw]

Thanks everyone for your input. Your advice has really made me think!!

[LuxLiving]

lfw - I started w/physical envelopes, then went to a paper spending plan, then on to a spreadsheet budget system. That is to say, I kept trying. I learned that too much cash in envelopes led to excessive borrowing from one fund to do something NOW. I learned that a small cash allowance worked for me and The Hubster and the rest we manage online thru a system of using budgeting software (youneedabudget.com), a checking account and a moneymarket account. Use a system for a while and see where you relate to it and where it causes you a problem, then MODIFY as to meet your financial and psychological needs. Stay in the money management game. Good luck and keep asking questions here!

[lfw]

Thank you for the helpful information. I will give it another shot and try to adapt it to fit the variations that can occur unexpectedly.

[Ima saver]

I have been doing the envelope system for 40 years. i am new to computers and don't know how to use them to track my money.
I have made a budget and it is down on paper. Every monday, I sit down with the cash from the paycheck and my envelopes. I put away so much each week for car payment , land payment, phone, heat, electric, , etac. etc. etc. I also allot so much a week for those once or twice a year payments, property tax, house insurance and car insurances. For me that runs about $140 a week and I save it til one of those things is due.
My husband and I each get an allowance and we pay for our gas out of that.

The trick is to NEVER borrow from the envelopes. On the RARe occasion that I have borrowed, I put an IOU in the envelope and it gets paid back first.

I have an envelope for everything, christmas, medical, etc. If something really big comes up unexpected, I pay out of my emergency fund.
My first envelope says "pay yourself first" and that goes into savings each week.

[Ima saver]

Oh, twice a month, I pay my bills. I take the money out of the envelopes and put it into checking. My checking account is virtually zero, except the money for the property tax, house and car insurance is left in there to accrue until needed. I keep a running total of that money on a post it note in the checkbook. I do not ever write personal checks for cash or use an ATM machine. That is what I use my personal allowance for.