Envelope System

[Gingerella72]

Many years ago, I used the envelope system to plan finances and save money. (I assume everyone here is familiar with what it is, but just in case, here is a brief overview: http://frugalliving.about.com/od/mon...ope_System.htm )

But when I used it before, it was in the days where you actually cashed your check and used, you know, real cash in the envelopes.

Now, we have direct deposit, and we pay for everything via debit card, online bill pay, or checks (for those holdouts that don't have online bill pay).

I'm having trouble wrapping my brain around how I would do this in a virtual sense. I know there are products/programs for sale that help you do this but I don't want to spend any money on something I feel I should be able to figure out for free.

Does anyone do a "virtual" envelope system? How do you have it set up? And, does it help you?

[shadowmoss]

Hmmm. Thinking outside the envelope a bit (sorry, I couldn't resist), I would get something like Evernote (free download) that syncs between my (smart) phone and my computer., and I would set up a 'Note' for each category with the amount as the first line. While out shopping or sitting at the computer I would put the amount I spent in each category as I spent it, and every day or two do the math to see how much I have left. If you had time when doing so you could keep up the running total as you spend in each category.

Not perfect, but one solution.

[catherine]

I think people who espouse the envelope system, like Dave Ramsey, stick by the original concept, and advocate using cash for things like food, gas, clothing, personal pocket money, etc. I don't think he necessarily thinks you need to go to the phone company to pay the phone bill.

He says that when you buy digitally, you don't feel the pain of spending in quite the same way as when you are peeling off those bills, which I believe to be true.

The way I do it is, I carve out those categories in which I typically pay can in a retail location and add them all up from my monthly budget sheet, divide by 4, and withdraw that amount of cash once a week to cover just those expenses and when I run out, I run out. No dipping into the debit card account.

IF I do buy a digital download from Amazon for instance, I subtract that amount from my next week's withdrawal. To your point, I just don't see myself going to the bank and getting a money order and sending it to Amazon (could you even do that??)

I do tally my previous days' expenditures every morning on my YNAB form so I can see what my balance is in all categories

[SteveinMN]

Gingerella, any personal-budgeting software that's worth anything at all offers either an actual "envelope" paradigm (like Moneywell, Snowmint, and NeoBudget do) or offers the ability to set budgets (virtual envelopes) for each spending category and then shows you either monies remaining or amounts beyond budget. Some of them do this with red ink ("You're $40.53 in the hole!") or with actual envelope or bucket icons which show what you have left to spend in the budgeting period.

There are some higher-profile exceptions, like Quicken, that do not offer a free trial (Quicken offers your money back in 60 days), but most software packages offer a free trial so you can see how well you and it get along -- because you will need to get along to make it a success.

I use SEE Finance on the Mac, which allows for budgets, but I haven't set them up yet. I may not ever do that. We are in deep on electronic payments simply because I find that much simpler than writing checks for each vendor or logging into a vendor's Web site to pay a bill. Besides, if it's been a cold month and we've turned up the heat, we've turned up the heat, and we'll have to pay for it somehow. Maintaining an artificial budgeting amount will not, for us, encourage us more to keep the thermostat down. And it's not like I won't pay the heating bill because my budgeting software says we've run through what we thought we'd spend. We just trim the sails and save someplace else. And track the amount to see if it's something we still think is worth what we're paying.

[Spartana]

I think people who espouse the envelope system, like Dave Ramsey, stick by the original concept, and advocate using cash for things like food, gas, clothing, personal pocket money, etc. I don't think he necessarily thinks you need to go to the phone company to pay the phone bill.

I agree. I no longer do a budget so just take out a specific amount of cash each month and put it all together in one envelope and use that for food, gas, entertainment, etc... for the month. I don't use debit card ever and only use credit cards for big purchases or when I travel and pay them by check in full when they are due. Bills for utilities, insurance, etc... are paid by check (I had a bad experience with direct debit so no longer use that). I also don't buy anything online so sticking to all cash is easy. And yes - I do feel the pain more whjen I'm parting with cash money rather than when using a CC or debit card or even a check.

[decemberlov]

I think not using cash almost defeats the purpose of using the envelope system. Out of sight out of mind sort of thing...
I like being able to see what cash I have on hand...using the debit card makes it way too easy to overspend IMO.
I don't get direct deposit but my fiance does and we just pull out our allotted amount of cash for food, gas, etc., a designated amount goes to savings and what is remaining in the checking account is for paying the bills.

[decemberlov]

Oh...almost forgot. Google has documents that allow you to access and share with other people. Some of them are quite helpful! You need a gmail account to use them.
https://drive.google.com/templates?c...=Google&pli=1#

[SteveinMN]

I like being able to see what cash I have on hand...using the debit card makes it way too easy to overspend.

We (first wife and I) went cash-only for a while (except for things like the mortgage, for which we wrote paper checks). For us, it was a flop. It was just too fiddly to keep track of where the cash went in any specific terms, so come time to report on spending, we had a huge blob of "Unknown" and a few receipts we kept from other expenditures that month. For us, CCs and debit cards worked so much better when it came to knowing what goes where. But everyone should try it for themselves. We are just two data points....

[ToomuchStuff]

I still use a cash envelope for gas. (never paid for it with plastic in my life, still use mostly cash)
I don't get as specific as some would, but I use a program that you can get more specific in your budget. Gnucash is what I use and the documentation for it can be found online as well, since it is open software.

One of these days I may have to learn how to use an atm or online banking. But since direct deposit isn't an option at work, and checks still work fine (used for utilities), and I carry cash for purchases, I see no point in changing.