You want me to WHAT?

Money's been on my mind lately. I'm guessing it has been on yours too. Thought I'd share a budgeting tool that has finally made it so hubby and I budget.

Yes. BUDGET!

You have no idea how many failed attempts proceeded this discovery. Every month that we tried budgeting ended with the mournful whine, "but where did it all go???" (sigh of exasperation.....) It was just too depressing and failed for reasons I could never seem to explain. We weren't extravagant. We were trying to be good. We didn't even BUY anything, it seemed. So where had it gone? But now, I can SEE where it is all going...even when I don't want to. (Don't ask me about how long it took me to pay the budget back for a tiny, little splurge on summer clothes. Please don't.)

(But you can ask me how much I would have had to pay in credit card interest if I was paying the credit card company back for the splurge, rather than myself! :)

First, some history...envelope budgeting the old way....

My parents did this. My mom had a box of envelopes in her closet where all the budgeting for the month happened. Whenever she or Dad got paid, she'd divvy up the cash from the check among the different envelopes...groceries, kid fund... (Hmmm...those are the only two envelopes that I specifically remember. Guess what was important to me!) When it was time to buy something, she took the money from the designated envelope and spent what she had. If she needed more money for something, she'd have to rearrange the cash in front of her to funds the specific envelope in need. Or wait 'til next paycheck.

Fast forward 20+ years, where we rarely pay for things with cash.

Photo by Andres Rueda, used under Creative Commons License

You probably have several credit cards, a debit card, online bill payments, checks, automatic deductions, direct deposit, etc. etc. etc. Makes things a little bit more complicated than my mom's system, eh?

Enter mvelopes, an online company that allows you to use the same system, just catered to our electronic spending methods. You link your mvelopes account to your relevant financial accounts (bank accounts, credit card accounts, etc.) Daily, it retrieves all of your activity, both payments and deposits. You then assign each of those transaction (click and drag or set rules for assigning them automatically) to the appropriate digital envelope.

For instance, you get paid $1,000 by direct deposit. It shows up as an incoming deposit. You record it as income and then decide how much of that should be set aside for different expenses (rent/mortgage, groceries, movies, clothing, insurance, etc.) If you set aside $100 for groceries, your grocery envelope will show it has $100.00 in it.

Then when you buy something, (does $32.00 for cupcakes count as groceries?) that transaction shows up and you have to assign it to the correct envelope. Let's say I convince hubby that $32.00 for cupcakes is a valid grocery expense. (That many cupcakes could sustain a girl for a long time!) When I assign that transaction to groceries, it then shows I have $68.00 left for groceries until more money comes in.

Hmmmmm....more cupcakes? $68.00 would buy a lot of cupcakes! Enough to last until the next paycheck though? Hmmmm....

Let's make it a bit more complicated...you are really trying to use that rewards credit card, so you buy your cupcakes with it. (Miles and cupcakes? We're in the money...) When the transaction comes in and you assign it to groceries, it will take the money out of your grocery envelope and place it in an envelope called "money for rewards credit card". This way it shows you that money has been spent from your budget even though you haven't paid the credit card company yet. Now, when the bill comes, you can pay it off in full. This prevents one of the traps I used to fall victim to...thinking because there was money in our checking account (we're not broke!), we had money for it. Right? So I'd charge this and that (nothing extravagant) to the card and then be flabbergasted that it put such a squeeze on our checking account to pay it off or I'd have to carry the balance over.

Mvelopes has it's quirks, admittedly. And it is a tool, not your mother. You still have to manage it...assign transactions, adjust your budget, fund your envelopes. It won't prevent you from spending more than you have allotted for a specific part of your budget. Those envelopes can go in the red! (See above re: clothing splurge this summer!) And there is a small fee. But if you are checking it frequently, you see when and where unexpected, or seemingly insignificant expense hit your budget and how they impact it. You can see, where your money is going, but also how much you have left and decide how you are going to spend it. And, I've discovered you can see how much you have saved and what your savings are for.

Whew. There it is. My long post that feels a bit like an infomercial. But if any program can help me see how to increase my spending account for cupcakes, I mean increase my savings and education funds and things, I am all for it! And mvelopes has done just that.

Happy budgeting all!

p.s. hungry, anyone?