Envelope Budgeting System

MissLaura

Hi all,

I've recently discovered Dave Ramsey and the Total Money Makeover, which I'm excited to start when it arrives on Monday (if you're looking to buy it, I snapped it up on Amazon Marketplace for a fraction of the price second hand) and I'm happily working out all of my budgets and budget categories.

I'm looking to start an envelope system - I know they're not for everyone and some of you may prefer YNAB, etc - but it's just something that I know will suit me more to begin with.

Does anyone else use an envelope system? Do you have any hints and tips, etc?

I have an A5 Filofax, so could use that to create one.

FireWyrm

YNAB is an envelope budgeting system, or zero-budget if you prefer.

Essentially, all budgeting is envelope budgeting whether you use a piece of software, multiple accounts or actual physical envelopes.

As to advice....

I would suggest you move all of your DDs to the beginning of the month. That way, you know what is sent out and when. While you are at it, separate your bills account from your expenses account and never mix them up, it is the classic error we all make and then wonder why things bounce.

Budget for everything. If you have a car, you will probably need an MOT which means you will also probably require a repair to some extent. Stop pretending it wont happen. Likewise, childrens' clothes and shoes.

Use your FiloFax to the maximum. I use mine to easily track information such as insurance due dates, account information, house repairs and shopping lists etc. My A5 tells me all I need to know about the household at any given time and YNAB keeps the budget on track.

Reassess your budget frequently. It is an unusual year where every month pans out exactly the same and there are no suprises. Learn from those surprises and budget for them.

Frogletina

I used the equivalent of envelope budgeting for years - anyone remember the tins that used to be sold with various slots (or did I dream that one up)

Anyway, back to the here and now. Although I have spreadsheets for my main expenses I have just resurrected envelope budgeting for birthdays and Christmas. I have envelopes with the names on of people who I buy for and when I have excess money in my purse I top up the envelopes.

I know it's not making any interest by not being in the bank, but it stops me spending up to the budgeted amount of housekeeping money etc. I like to see the envelopes filling up and then I can just take the envelopes out when I need to buy the presents.

I also currently save £2 coins - if they are given to me as change I don't want to spend them. Seeing the coins and notes in envelopes seems to have a psychological effect which a bank account doesn't give you.

Each week I allocate £50 for housekeeping which I like to take out of the bank each Monday. For an experiment, at one point I only took £5 to the shop at a time - it really concentrates the mind and makes you think about the choices you can make. It is much easier (and more dangerous) to spend with a debit card as it doesn't seem like real money.

MrsSave

I don't take the money out of the bank each month, but I have different savings/current accounts for everything! I also use an app, which I find brilliant that shows me how much I have left in every account, and forecasts etc. I use it every day, it takes around 5 minutes, probably less, but then if something is slightly out I can usually find it immediately!

The app is called account tracker.

getmore4less

There are 2 parts to finances

The plan and the cash flow

A budget is a plan for how you allocate your resources(assets/income).

Cash flow is making sure the income and outgoings are in the right order which puts the budget on a timeline.

Your plan/budget tells you how much you have for something and modified for cash flow when you can spend it.

If you track your spending to the plan then it does not matter where the money is there will always be enough if you are on the plan.

The two main problems are

Not allocating enough for the category, overspending or spending too soon.

Not allocating anything for something so comes out of emergency which is too small.


Enveloping is just a form of tracking which will not work if the plan/budget was no good in the first place

ganderson1804

I run multiple accounts and it works best for us. We have one bills account which feeds all my smaller accounts a set amount every month. If I’m out shopping and need to buy a gift, I pay it on our living account card and transfer that exact amount back into my current account when I get home. Same with bigger bills like insurance.

Main current account – Bills Account
Both salaries and child benefit pay into this and all bills pay out of here. We never touch this account.

Second current account – Living Account
This account receives an amount every month which covers food, fuel and entertainment. We live off this account.

Savings account 1 - Car / Home / Emergency
Covers tyres, MOT, servicing, insurances, road tax, window cleaner, household goods etc.

Savings account 2 – Clothes
All clothes for my husband, myself and my daughter

Savings account 3 – Gifts
All Christmas, birthday, mothers day, fathers day, new babies, birthday cards, wrapping paper

Savings account 4 – Holidays
Holiday time! Pays for the break and holiday spends

Savings account 5 - Savings
Long term savings for anything else

This has completely changed our way of managing money and really makes us consider our purchases. I appreciate a lot of people like YNAB but for me I much prefer logging onto my banking app and seeing all my account balances in one place and knowing what I can spend and what category it comes into. I like to actually see the pots of money. I have all these accounts with RBS and their app is brilliant for viewing all my accounts and doing instant transfer of funds between the accounts.

I had no problem opening all the savings accounts in one go. I checked with the bank and they said I could have as many as I liked. On my digital banking I have physically renamed them all so they match my descriptions above. At the end of the year we will review the whole system and re-jig how much we pay into each account next year depending on how it’s been used this year.

Hope this helps!

Mort

FireWyrm has some good points here, none of them are rocket science but they will help sort out a budget.

Budgeting is something that is ignored at your peril, it's what led to our downfall, we used to budget and things were fine we both took our eye of the budgeting ball and the sh*t hit the fan. Budgeting through a DMP got us back on track.
At the end of the day it's the budget that matters and the tool(s) you use to manage it are secondary, find one that works for you and stick to it. Personally I am happy using spreadsheet software

FireWyrm wrote: »

I would suggest you move all of your DDs to the beginning of the month.

The only qualifier I would make on this point is that it works best when you have a main income that comes in once a month.

FireWyrm wrote: »

Budget for everything. If you have a car, you will probably need an MOT which means you will also probably require a repair to some extent. Stop pretending it wont happen. Likewise, childrens' clothes and shoes.

This is a must.

FireWyrm wrote: »

Reassess your budget frequently. It is an unusual year where every month pans out exactly the same and there are no suprises. Learn from those surprises and budget for them.

And remember to take into account future changes. We all know that the Council Tax and Water Bill will be increased every April. Budgeting is about looking back and using that information to project ahead.

cwtchingpennies_2

Ganderson1804 wrote: »

I run multiple accounts and it works best for us. We have one bills account which feeds all my smaller accounts a set amount every month. If I’m out shopping and need to buy a gift, I pay it on our living account card and transfer that exact amount back into my current account when I get home. Same with bigger bills like insurance.

Main current account – Bills Account
Both salaries and child benefit pay into this and all bills pay out of here. We never touch this account.

Second current account – Living Account
This account receives an amount every month which covers food, fuel and entertainment. We live off this account.

Savings account 1 - Car / Home / Emergency
Covers tyres, MOT, servicing, insurances, road tax, window cleaner, household goods etc.

Savings account 2 – Clothes
All clothes for my husband, myself and my daughter

Savings account 3 – Gifts
All Christmas, birthday, mothers day, fathers day, new babies, birthday cards, wrapping paper

Savings account 4 – Holidays
Holiday time! Pays for the break and holiday spends

Savings account 5 - Savings
Long term savings for anything else

This has completely changed our way of managing money and really makes us consider our purchases. I appreciate a lot of people like YNAB but for me I much prefer logging onto my banking app and seeing all my account balances in one place and knowing what I can spend and what category it comes into. I like to actually see the pots of money. I have all these accounts with RBS and their app is brilliant for viewing all my accounts and doing instant transfer of funds between the accounts.

I had no problem opening all the savings accounts in one go. I checked with the bank and they said I could have as many as I liked. On my digital banking I have physically renamed them all so they match my descriptions above. At the end of the year we will review the whole system and re-jig how much we pay into each account next year depending on how it’s been used this year.

Hope this helps!

This is a plan I'm in the process of setting up, I'm still jiggling amounts so that I do not need to touch main account!

My filofax is my lifeline for tracking and I would be lost without it.

I love Dave Ramsey his book is fab xx

MissLaura

Thank you everyone for taking the time to contribute to this thread, I really appreciate all your tips on budgeting. I've made a list from all of the above points and I know they will really help.

I suppose it's a bit like anything, the budget is the framework and ultimately the most important thing and the tool in which to access it is utterly secondary.

I will spend some time looking through my expenditure, outgoings and things I need to budget for in order to come up with my plan and then perhaps look at how to 'monitor and track' it when I'm at that point.

The Dave Ramsey Total Money Makeover didn't arrive this weekend sadly, so I'll start that this week. Glad to hear it's a good read.

mismatch

FireWyrm wrote: »

YNAB is an envelope budgeting system, or zero-budget if you prefer.

Essentially, all budgeting is envelope budgeting whether you use a piece of software, multiple accounts or actual physical envelopes.

As to advice....

I would suggest you move all of your DDs to the beginning of the month. That way, you know what is sent out and when. While you are at it, separate your bills account from your expenses account and never mix them up, it is the classic error we all make and then wonder why things bounce.

Budget for everything. If you have a car, you will probably need an MOT which means you will also probably require a repair to some extent. Stop pretending it wont happen. Likewise, childrens' clothes and shoes.

Use your FiloFax to the maximum. I use mine to easily track information such as insurance due dates, account information, house repairs and shopping lists etc. My A5 tells me all I need to know about the household at any given time and YNAB keeps the budget on track.

Reassess your budget frequently. It is an unusual year where every month pans out exactly the same and there are no suprises. Learn from those surprises and budget for them.

Firewyrm I like the moving dd idea as my dd r all thru the month but I'm paid 4weekly -total nightmare tbh.. can I do this thru the bank or do I have to contact each company directly?

FireWyrm

mismatch wrote: »

Firewyrm I like the moving dd idea as my dd r all thru the month but I'm paid 4weekly -total nightmare tbh.. can I do this thru the bank or do I have to contact each company directly?

You will have to contact each company individually and some will not do it. Co-Op for instance have standard billing days, the 5th, 15th and 25th for some strange reason and you must pick one of those. Still, the closer you can get all your DDs in one place and time, it should make it easier to see what is happening. The only caveat I would make is that you should choose an interest bearing account for this purpose like TSB and have a healthy positive buffer in place just in case your replenishment payment doesnt arrive on time. It is entirely possible for there to be a banking issue which prevents deposits for a number of days and you dont want to end up with bouncing DDs.