Thursday, April 12, 2012


Back in November we incorporated the envelope budget system into our life.  After some trial and error over what works for us and what does not we have a system working for us.  We arrange our money by actually having cash in envelopes.  Categories like:  Toiletries, pet care, hair appts, doctor co-pays, medication/vitamins, kid fun, clothing, etc.  The money budgeted for that month for each of those categories gets withdrawn from our checking, and put into the envelopes.  However much is in each envelope we are allowed to spend.  If the money is not there, then we do not spend it.  Simple really, but it can be really hard.

For other items we need to save for, but are not a monthly envelope expense item go into a separate savings account.  When we started this we opened up separate shares (savings sub-categories) at our bank labeled with different names.

For example:

Transportation (in this savings account we put the following items)
  • Registration
  • Car insurance
  • Car maintenance
  • Oil change
  • Gas
Every month I put so much money in each of these categories, that way when our car insurance is due in six months I just transfer it from our "transportation" savings account into our checking account.  Does that make sense?  What I do is take what our last six month car insurance bill, divide it by six, and then put that much money into that savings account.

For those who like numbers:

Bill $600 (not really, just an example)  600/6=100.  Money budgeted for car insurance each month would be $100.  That money gets transferred into the transportation account each month.

That way when we get the bill in the mail, the money is already there, and it is not an inconvenient, expensive expense.  It is just a matter of transferring the funds into checking, and paying the bill.  Easy breezy.

I do the same thing for our annual registration.  I just looked at last years total, divided it by 12, and put that money into the transportation account each month.  

The first three months were the most difficult (especially since we started over the holidays), it took a lot of rearranging and re-prioritizing.  When you see where every single dollar is going, it makes you stop and think.  I really started to see where we were blowing money, and where we were not not putting enough focus.  Now instead of wanting something, and going out and buying it right away.  It gets an envelope, or separate savings account.  When I have enough in there to pay for it, I buy it.  Until then I wait.

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