Envelope Budget System

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I've recently come to the conclusion that I do not have a good handle on my personal finances. I sometimes feel like my checking account is a sieve.

Each month I automatically transfer money from checking to my savings account for my "house downpayment fund." Lately I've had to take that ear marked money and put it back in my checking account to pay the bills. It's been too long since I sat down and took a look at what the death by thousand cuts are to my finances:

I've spent the last couple of nights going through my bills developing a written budget and here are some key take-aways I found:

- My cable bill is $145/month which includes cable, internet and phone. I maybe watch the History or Discovery Channel an hour a night. Otherwise I'm busy working, sleeping or out. Therefore, this feels dumb. I plan to call and get this reduced. Is this an outrageous cable bill?

- I spend about $350/month on groceries. Is this reasonable for single 29yr old red blooded meat eating male? I weigh 150lbs and am in good shape so I don't eat gallons of ice cream or TV dinners. I eat a yogurt and banana every morning, eat PB&J for lunch and for dinner I'll make something like pasta with meat, turkey, chicken cutlets, vegetables, etc. I think 90% of my food costs result from weekend meals and dinners. Food. Is. Expensive.


Long story short, I've decided to try the envelope system. Basically, you set a budget for each category (i.e. groceries, gasoline) and put cash in an envelope for each category at the start of each month and you live by what's in those envelopes. Obviously you don't have to mail cash for the utility bills - those can be automatically drawn from your checking account but you can budget these by rough estimate.

Anyone have any experience with the envelope system or ever try it? Any advice? I bought groceries the other night and paid cash and the clerk actually said to me, "Oh wow, cash." I guess everybody uses CC these days at the grocery store.
 
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I live with an envelope system. Every week when I get paid, I allocate monies to each of 4 envelopes: health insurance, "save", the upcoming 6 months of car insurance and one that covers rent/FPL. Checking account is kept at a minimum to cover the auto payments and all else is paid in cash. I only use my credit card IF i have the cash to cover it then & there.
 
It's exciting to figure it out and get ahead. The purpose of the envelope systems is to limit impulse buys. Starbucks, dinner out, any thing disposable counts. If you can find a way to cut bills and are not impulsive you'll be set. Dump cable for Netflix, and keep a high speed connection, many shows can watched online once they've played on network TV. Start a big spread sheet of expences, include insurance and other things you forget about. It will take a few months to really see where it all goes.
 
Originally Posted By: RedOakRanch
Dump cable for Netflix, and keep a high speed connection, many shows can watched online once they've played on network TV.


I'm really considering it. I can get just high speed internet for $34.99/month if I ditch the cable and phone. I sit down to watch an hour or so of TV a night and I feel like it's already half commercials.
 
I budget my expenses as follow: stock up when it is on sale for more than 50% off. Some weeks I bought more than $200 groceries, other weeks I spent less than $20-30. Average out about $100/week for 3 people. We eat out 2-3 times a month at about $40-60 each time for 2 (myself and my wife).

No Cable TV, just 5 Mb internet at $35/week and $20/mo home phone. But I have 4 cell phones with Verizon with monthly cost of $220. Utilities costs about $150/mo for everything(water & sewer, natural gas, electricity, trash ...)
 
I felt the same once we started a family. Seemed like there was always more month than money. We went thru Dave Ramsey and it changed our financial life. Of course the envelope system was a huge part of it and it really works to get your spending under control which is the key to building wealth. Good luck! I think you'll be pleased with it.
 
$135 cable bill is a lot, you can probably just get Netflix and internet for $50-80 instead. If you know your next-door neighbor well you can probably ask to split the internet bill and share via wifi.

$350 / mo grocery is not ridiculous, but I don't know how much you eat that is luxury so it is hard to say how much more you can cut in this. Cutting too much and you may get fatigue and went out to eat instead. I personally spend $200 per person but I don't buy expensive cut of meat, mainly $10 cat fish once a week, $4 chicken drumsticks once a week, etc, etc.

Most importantly, how much is rent? Is there a way to save a few hundred a month there?
 
Good luck. It takes a lot of discipline to undertaken real financial budgeting. Find what works best for you and stick to the plan. It may seem hard at the time but will be worth it later on.
 
Originally Posted By: cwing6
I felt the same once we started a family. Seemed like there was always more month than money. We went thru Dave Ramsey and it changed our financial life. Of course the envelope system was a huge part of it and it really works to get your spending under control which is the key to building wealth. Good luck! I think you'll be pleased with it.


Yeah, my boss started casually talking to me about Dave Ramsey during a work function a few months back and I've been listening to him for a couple of months now. I finally decided to kick-start a written budget. I'm just tired of some months being ahead and other months feeling like I'm treading water - I've basically been "winging it" simply expecting to out-earn my expenses without knowing exactly where I stand. My saving grace is that I have absolutely no debt. The credit cards are the worst though - talk about death by a thousand cuts. You know, that feeling when you see the balance due and the listed purchases below and you think to yourself, "How in the heck does this add up to that?" You feel like you have to add it all up three times to make sure they aren't ripping you off.
 
One of the best things we did when we were young was get financial advice on how to budget our personal finances-at that time it was a college class both my wife and I took. One of the keys we both took away was to pay ourselves (for our future) first, and then live off the balance. For us it was individual bank accounts-one for savings, one for vehicle repair and maintenance (we put the equivalent of a vehicle payment in each month), one was for home maintenance, and then our checking account was for bills and daily life. As our careers and income progressed, a large portion of our income was automatically diverted to investments, but we still maintained the savings accounts for things like vehicle replacement and repair, home maintenance, etc. We probably don't need to do it now, but it works so well that we still do.

As the savings accounts grew beyond what we would ever need for that purpose, we rolled the excess into higher earning investments. After a few years it became totally natural to divide our after-investment income into the various savings accounts, and it became so much fun to watch them grow that we made the choice to buy used cars rather than new, do home repairs and remodeling ourselves, and find other ways to keep the accounts growing. It's one reason we never bought into the TV watching thing-especially when cable TV became available. When I see some of the outrageous bills for TV that some folks have, I realized that is money that we saved over several decades, and it's one of the reasons why we're in the comfortable financial position that we are in. Even modest things add up-if you can learn to cook a bit differently and can trim $30/month from your grocery bill, then that's an additional $360 you'll have in your savings at the end of the year. That's an additional month of groceries for you. Your $350/month is about what my wife and I spend on groceries, and we eat extremely well and extremely healthy.

It may not seem like it when you're 29, but about the time you reach your late 50's and retirement is looming large in the windshield, you'll realize how much that self discipline paid off, especially when the people around you are bemoaning the fact that they failed to plan, and they hope that social security will be enough to get them by in their golden years. It happens sooner and faster than you think.
 
It will take some discipline but worth it in the end.

I read recently one way to cut back on spending is to wait a few days after you decide before you actually make the purchase.
 
Dump the cable and eat healthy. Vitamins and minerals are lacking in processed foods.
 
The flaw I see is I get a 10% discount for paying my auto and car insurance all at once instead of monthly. So I do that-- it pays better than any bank short-term deposit.

Then my heating oil bill is only rough in the winter.

Car regsitrations come at odd times, and I have to pay for summer day care for my kids, but that bill comes in March-April, pre-registration time. It hurts on top of the heating oil bill.

It's hard, but not impossible, to budget for (and escuse/ not excuse) these "one time (quasi) emergencies."

So what happens is an emotional mess when September-October I seem to be doing all the saving for the year.

I don't "buy in bulk" all that much, and I don't buy stuff b/c "OMG it's on sale." On the flipside I do get my snow tires on labor day (rebates) and know the actual value (NOT price) of a wide range of stuff. Wife handles the kids clothes; she does pretty well, getting stuff on clearance for them to wear 10 months later and the next size up.

But it's hard when a huge chunk of your money is tied up in rent or student loans. The parts you can cut aren't much, sometimes.
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PS you absolutely can cut your cable bill. I'd eliminate it entirely-- just get cheapo internet. Your cable company will come crawling back to you with promo deals. Ask your cable company for a "rate card"-- it's an FCC requirement that they hide with vigor. It spells out stuff like the 2 Mbps internet for $15 they'd rather not advertise.
 
I dumped my Dish network and Verizon family plan and got $15/month prepaid phones for wife and I. I kept my broad band and have been using Majic jack for several years for a house phone. Saved over $300/month.

For TV I got Time Warner cable for around $100/month. Still, I'm $200/month to the good.
 
Originally Posted By: Pop_Rivit

It may not seem like it when you're 29, but about the time you reach your late 50's and retirement is looming large in the windshield, you'll realize how much that self discipline paid off, especially when the people around you are bemoaning the fact that they failed to plan, and they hope that social security will be enough to get them by in their golden years. It happens sooner and faster than you think.


Great point. I've been contributing to a 401k since 22 years old once I got my first job out of school and for the last few years now I've been maxing out my 401k and Roth IRA. The "winging-it" budget is pretty much near impossible at my income level when maxing out these accounts but I know full well the benefits of doing so. This is not to say that I haven't been dreaming of and at this point nearly hear the exhaust note of a brand new V8 5.0L Mustang in my sleep. Every couple of weeks I pull up some classic Dave Ramsey "new car rant" on YouTube to slap sense into me so I stay the course.
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What is the cell phone bill?

You can do cricket for 35$ and its AT&T towers.

Go to 15mbit internet.. probably 35$ or so.
dont rent a cable modem(if applicable) they go for 50$ vs 7$/month

If needed get sling tv for 20$/month they offer a free roku2 box to play it if you subscribe for 3 months in advance.

Learn to follow sales ads at grocery stores.. can easily trim 25% off the grocery bill if you are a little flexible.

Sometimes CC can earn money.. one of mine is 6% back at the grocery store.. it adds up to a couple hundred a year.
I pay it off every month.
 
Originally Posted By: GMFan
I've spent the last couple of nights going through my bills developing a written budget and here are some key take-aways I found:

- My cable bill is $145/month which includes cable, internet and phone. I maybe watch the History or Discovery Channel an hour a night. Otherwise I'm busy working, sleeping or out. Therefore, this feels dumb. I plan to call and get this reduced. Is this an outrageous cable bill?

- I spend about $350/month on groceries. Is this reasonable for single 29yr old red blooded meat eating male? I weigh 150lbs and am in good shape so I don't eat gallons of ice cream or TV dinners. I eat a yogurt and banana every morning, eat PB&J for lunch and for dinner I'll make something like pasta with meat, turkey, chicken cutlets, vegetables, etc. I think 90% of my food costs result from weekend meals and dinners. Food. Is. Expensive.

We do basic cable (like to be able to catch the news while getting ready for work, hear the weather, etc. and the occasional show) $20 (including the cable box (no option to BYOB or buy) and $60 for the internet (I'm very tempted to shop around but we have pretty good service and work from home at least 1 day a week each so I don't feel like we can skimp).

The food cost got me curious - I totaled up our monthly costs since March and we haven't went over $250/month for two of us. We shop mostly sales for whatever it's worth, not trying to go overboard but we'll buy a few weeks of chicken when it's on sale, and eat the vegetables of the week, and typically do exterior of the store shopping (fruits, vegetables, fish, meat, dairy) and try to stay away from the prepared foods.
 
"It's a lot easier to spend than it is to make!" -War of the Roses

I try to make sure we a have a little 'disposable' stash available, too.
 
Dave Ramsey is SPOT ON!
My listening has evolved
High school, I listened to music
College I listened to political talk radio
Now I listen to Dave Ramsey in the car driving to work...

or the exhaust note of my Lexus V8
 
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