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Old 09-02-2007, 12:44 PM   #1
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envelope system?

Seems quite a few of use the envelope system ... can you explain to me how that works and how you use it?

From what I understand, it's cash based and budget based. You set aside however much you have budgeted per category in cash per envelopes ... is that right?

Right now, at each payday, I subtract out the fixed bills for that half of the month from the checking acct. And, if I were doing the envelope system, then I'd take out cash for each envelope for, say, groceries, gas, hubby's allowance, household & pets, etc??? As it is now, a majority of bills are paid auto pay or online and then we use the debit card for everything else (which isn't much, usually, beyond gas, groceries, etc).

So, what are the pros & cons of the cash/envelope system? I can see it being easier to track everything, but I hate carrying cash all the time. Plus, we get points using our DC.

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Old 09-02-2007, 02:41 PM   #2
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Re: envelope system?

Most of my bills are direct debit or paid online, so I use the envelopes for gas, groceries, allowance, and household only. One way to keep from dipping into the grocery money is to leave it at home unless I'm doing the grocery shopping. It does take discipline, but it also gives you a clear visual on how much you have to spend.
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Old 09-02-2007, 03:42 PM   #3
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Re: envelope system?

Right now we're still trying to figure out how much goes where, school just started so we're trying to work with the numbers and see what we can lump into our "monthly musts" and then our fluxuating amounts like groceries, gas, fun, etc.
We take out a fixed amount each week for our car payments, car insurance, health insurance, rent & preschool tuition. After that we get our groceries, gas & pay our offering and then our bills based on a list we have each week. When I earn extra money I just try to pick one of the bills on the list and pay those so we have less to pay the next week or use my cash for groceries, gas or our offering.
The envelope system definatly gives you a more accountable feeling, it helps prevent you from overspending when you know you only have so much this week, even if you can carry over weeks worth of shopping by charging something and paying it off the next month.
We use Dave Ramsey's Financial Peace program and the envelope system. Right now we're mainly working on changing our spending habits, paying cash for things, paying off debt, eliminating things we don't need and downsizing where we can.
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Old 09-02-2007, 10:03 PM   #4
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Re: envelope system?

We use the envelope system. Our categories we use it for: Personal spending money , I get one and he does too, food, gas, tithe, we also take out our bills, make a money order and but it in the envelope. We do that because in our budget sometimes the bills come out way before their due because our rent is so high. We'll also soon start one for our vacation and holiday gifts. probably to avoid temptation we'll put the cash into money orders.
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Old 09-02-2007, 11:46 PM   #5
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Re: envelope system?

We went to walmart and got magnet clips and manilla envelopes. We labeled each envelope with a bill. (Rent, car, Food/gas, electric, cable) then since we get paper bills- we knew that ok our electric bill is $100 due 00/00/0000 so we knew that each paycheck to take $50 and put in electric.

It was actually easy NOT to dip in the money, and it was nice to know exactly where our money was and not sitting in some bank where we may overdraft, forget a bill, etc.

We stopped the system cause we moved but we really need to go back.
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Old 09-03-2007, 12:31 AM   #6
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Re: envelope system?

If you need help organizing use mvelopes.com great site!!!
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Old 09-03-2007, 05:26 AM   #7
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Re: envelope system?

We've been using this system for 12 years and it's great! At first I was mad because I liked to just spend whatever, whenever. If it was in the checkbook, then I would spend it (had a hard time adjusting from 2 paychecks to 1).

Our categories currently:

Food
Chiropractor
Boys Allowance
Gas (one for each vehicle)
Baby Sitting
Haircuts
Entertainment
Postage
Oil Change/Car wash

In the past we had auto insurance in there as well. Once we were able to get ahead, we paid the auto insurance for 6 months (eliminated the monthly finance charge) and now are able to stay ahead of that bill.

With my DH being military, we get paid twice a month. So the above are divided up based on how much goes into the envelope (so that it's close to equal each paycheck). Food is filled each pay period, as is gas. Everything else is filled once a month, from a specific pay period (ie: allowances are paid on the 1st, postage on the 15th, etc).

DH and I each get an allowance as well. It's not much, but it keeps me from dipping into something else when I'm out and want a soda or ice cream. The boys are learning to save their allowance for video games.

Because we are in Germany, we mail alot more than we did in the past. So that's the need for the postage envelope. I buy stamps and mail packages from that stash. We will save up thru the year so we can mail Christmas and birthday packages as needed.

When we were saving for a family vacation to Disney (while still in the states), I was able to save over $3000 in one year like this:

1st: fill food, chiro, baby sitting, entertainment, oil
15th: fill food chiro, baby sitting, entertainment, haircuts, postage

Each time I went to fill an envelope (or the day before DH was to do it), I would take out ALL left over money and put it in a Pringles can we had decorated with Disney characters. I figured if we didn't eat out that pay period, then too bad. It now belonged to the vacation fund!

We didn't always use all the entertainment money (eating out, rent video, etc) or baby sitting money (cause we took the kids w/us and instead of movies, rented video to watch at home) so that was easy. Sometimes I got great deals on groceries/frozen items and didn't spend my entire grocery budget so that extra would go into the can. And sometimes (ok, when I kept up w/my exercise) I didn't need 2 trips to the chiropractor and that money was put in the can.

Ok, way longer than I thought but I'm a firm believer in this system! We just paid cash for a 2 week trip in Scotland (used the credit card on large items but paid it off in full on return) because I pilfered money from the envelopes this way. ***remember I live in Germany, so it's not as huge a deal as if we flew from the states***

We had 2 family trips to Disney World from Texas within 6 months of each other (2 different family reunions.....ugh!) using the envelope methods.

Anyway, it can be tough at first and it's hard to not steal from full envelopes when you've maxed out the gas and just "have" to go see your friend or hit the stores. If we were not saving for anything special, then I would let the money rollover in the food, entertainment, and baby sitting and then splurge on a nice dinner out or (more likely) buy a nice set of steaks and all the trimmings <insert vegan options here>.

Now, it took probably 7 or 8 years before we could afford those nice trips. But, after the first 3 or 4 months, it was second nature and I quit trying to swipe money from the other envelopes.

Ok, really stopping now!
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Old 09-03-2007, 10:45 AM   #8
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Re: envelope system?

Thanks for all the replies. I can see how it would take some getting used to. I think I may start taking out cash for discretionary spending ... well, actually, more for hubby than myself. Then, just leaving the DC alone except for gas & groceries.

I'm trying to build up our savings & set $$ aside for home projects. So, any extra I have in the checking account, I'm moving over to the ING savings. That helps me b/c it it isn't there for me to see, it isn't there to spend.
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Old 09-03-2007, 01:40 PM   #9
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Re: envelope system?

I just started on Dave Ramsey program Financial Peace University. This month is our first month on the system. I plan on having several cash envelopes and virtual envelopes.

Cash Envelopes:
1: Blow Money - Personal Money for myself and DH
2: Food/Household/Toiletries
3: Clothing/Diapers
4: Entertainment
5: Haircuts

Dave Ramsey suggest gas be a cash envelope, but I don't want to take my little guy out of his carseat to go in and pay cash for gas.

I am using virtual envelopes to save for other expenses, which I plan on leaving in our savings -

Virtual envelpes examples- quarterly and semiannual payments, car registrations, medical expenses, vet visits/grooming, gifts and Christmas, etc.

I am trying the Mvelopes website, like the other poster is. I am on the free trial month. I plan on using it to keep track of our virtual envelopes. It is based on the envelope system. You could easier track your virtual evelopes in excel or on paper.

I am thinking of opening an ING savings account for all or virtual envelopes and sinking funds. I like the idea of 4.5% interest.


This is what I think will work for my family and my
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Old 09-03-2007, 11:22 PM   #10
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Re: envelope system?

Virtual envelopes ... now that's something we should do. And, I currently track our debt (and previously spending) in Excel, so setting that up would be no problem.

I do forget about those regular, non-monthly expenses ... like motorcycle insurance, fuel oil, pet vaccinations, vehicle expenses (maintenance & licensing). That's a good idea to use Excel, and with the automatic savings plan through ING, I can easily set aside that monthly once I add up the total yearly expenses for those items. Thanks for that tip!

And, wimama ... if you're interested, I could send you a referral from ING ... you'd get $25 for a new acct w/ $250 start-up and I get a $10 referral bonus. PM me your email if you're interested.

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Originally Posted by wimama View Post
I am using virtual envelopes to save for other expenses, which I plan on leaving in our savings -

Virtual envelpes examples- quarterly and semiannual payments, car registrations, medical expenses, vet visits/grooming, gifts and Christmas, etc.

I am thinking of opening an ING savings account for all or virtual envelopes and sinking funds. I like the idea of 4.5% interest.
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