"Envelope system" with credit cards?

[FairestOfThemAll37]

OK, so I know this kind of defeats the purpose of the whole envelope system but is it possible to use credit cards as the envelopes?

I like the idea of the envelope system and being able to potentially save more, but I couldn't bring myself to give up the cc rewards lol. Additionally I don't have checks and would not be comfortable having those amounts of cash around.

I've never really tried to budget like that in the strictest sense. I usually just know what bills I have and know what's left and go from there.

I realize it would take more discipline, but has anybody tried this with CCs? I could essentially use a card for each category and stop when it hits the category limit. Anybody have any thoughts? Advice? Is this just so off the intended purpose that I shouldn't try?

Thanks!

 

[pryncess527]

Yes!!! Using YNAB

YNAB = You Need A Budget -- http://www.youneedabudget.com/

it's a zero-based budgeting software, with smartphone app, that makes it VERY easy to use CCs for everything and keep track of it, envelope style. A lot of us on here swear by it.

It does cost $60, but there is a 34 day free trial, and a 10% off referral coupon that I can't post here, but that you can easily google and find online. Or through their user forums -- http://forum.youneedabudget.com/ which are a very friendly place to get help with the software and finances overall.

It's also sold through the platform Steam, so goes on Steam Sale from time to time. It's worth every penny at $60 though! It's really had a radical transformation on the way I view finances.

 

[MAO]

I do this with my Quicken program, but the concept is relatively easy to implement with paper and pencil. Just remember where you keep the paper!

Basically, after *every* shopping trip, sit down and subtract from your check register (whether that be the actual register that comes with your checks or the category in whatever software you use) the exact amount you spent using a credit card. "Put" it somewhere else -- if you keep track of your checking account via just the check register, create another piece of paper you keep wherever you'd do your checking reconciliation and keep a running total of what you spent. If you use software, just create another account (savings for Visa, savings for Discover, etc.) and transfer from the checking to the savings account. Your bank will think you still have that money in the checking account because, technically, you do - but your brain knows that it's already spent.

Two things to keep in mind - when you pay your credit card bill, transfer the money back into your register before you write the actual check to pay the bill. And when you reconcile your checking account, you'll need to temporarily add that money back in, as well. I think that latter point is sometimes the sticking point for a lot of people, but it really isn't that big of a deal. And, it's a free method which can be implemented pretty much using any method you use to keep track of your money unless you're one of those "but I still have checks so I must have money" type people!

It sounds like YNAB may have something set up already in that software and, if so, it is probably worth a look. But if you're already using Quicken or some other means and don't want to buy something new, consider just adding an extra account that you know about (and the bank doesn't) and just move money between it and your checking. I've been doing this for probably close to 20 years. You can use the same concept to get your emergency savings funded, save for vacations, whatever. And the nice thing is, since it's still technically in your checking account at the bank, you can 'transfer' it back in to your register if you have a need for it. But until then, your brain thinks it's already gone.

 

[tzolkin]

I do agree about finding an alternative to the cash envelope system. It's really not practical for us to use cash (how do multiple people purchase with the cash from one envelope?) and we also enjoy the cc rewards-- just applied $600 toward last month's bill on one card and used our Disney rewards to pay for a weekend hotel stay to check out MCMCP.

Instead of carrying envelopes with cash, I have envelopes at home where I put the receipts and write the amounts right on the envelope. We can easily see how much money is "left" in each envelope and it only takes a few seconds.

I think this is easier than using separate cards and you don't have to constantly be checking each account to see when you've reached your envelope limits. Also, some things don't post immediately so it may not be as accurate. And if you do pay cash for little purchases, you may wind up omitting them from your cc totals.

 

[threeboysmom]

The concept can definitely be done. I use credit cards for EVERYTHING. Rarely do I carry cash.

I just track everything in an Excel spreadsheet that I review pretty much on a daily basis.

I have my categories listed along with the amount budgeted for the month (similar in concept to cash being in a physical envelope) - Food, Gas, Toiletries, Clothing, Household, Entertainment, Miscellaneous, etc.

For instance, gas is listed as $200. When I fill up, I enter the amount in the adjacent box, and Excel keeps a running total for me. When the total hits $200 or close to it, I'm done for the month (unless I can "borrow" from another category... but really try not to make that a habit).

 

[Golf4food]

I've used Mint.com (and the mobile app) for years to basically use the envelope system in real life and almost never use cash. Everything is credit cards where possible to get points/rewards. Very easy once you get it setup. Wouldn't want to go without it - makes life so much easier than doing it all manually on spreadsheets like I used to do.

 

[SirDuff]

I've used Mint.com (and the mobile app) for years to basically use the envelope system in real life and almost never use cash. Everything is credit cards where possible to get points/rewards. Very easy once you get it setup. Wouldn't want to go without it - makes life so much easier than doing it all manually on spreadsheets like I used to do.

I think the same about YNAB - it does what I used to try to make (complicated) spreadsheets do.

I'm sure you could do it with simple spreadsheets, but I never figured it out!

 

[FairestOfThemAll37]

OP here, thanks everybody! I'll look into YNAB.

Whatever makes it the most automated is the most likely to stick with me. I have a very low tolerance for things I find tedious and will revert back to whats worked 'well enough' lol.

I admittedly don't do any tracking other than to check my credit accounts online-I actually use an app that tracks them all (I'm not overly worried with linking card accounts on something supposedly secure-there are far more likely places for my info to be compromised).

I have so many cards it's easy to lose track so having them all in one place works well for me. I've never really budgeted before so I imagine there's some trial and error?

I mean it's not like I can say "sorry my gas 'envelope' is empty so I'm not coming to work" or not eat because I can't go to the store. Or do people do this?!? I have no idea what I spend in a given month on gas so I imagined I'd guess and adjust a bit for 3-4 months?

Some things I know as they are the exact same every month like dog daycare and baths for my pup, rent, cable, etc. utilities vary from $70(an all time low woohoo)- over $250 in the summer.

Does YNAB help you figure out how to budget? Lol I'm so ignorant in this area.

 

[pryncess527]

OP here, thanks everybody! I'll look into YNAB.

Whatever makes it the most automated is the most likely to stick with me. I have a very low tolerance for things I find tedious and will revert back to whats worked 'well enough' lol.

I admittedly don't do any tracking other than to check my credit accounts online-I actually use an app that tracks them all (I'm not overly worried with linking card accounts on something supposedly secure-there are far more likely places for my info to be compromised).

I have so many cards it's easy to lose track so having them all in one place works well for me. I've never really budgeted before so I imagine there's some trial and error?

I mean it's not like I can say "sorry my gas 'envelope' is empty so I'm not coming to work" or not eat because I can't go to the store. Or do people do this?!? I have no idea what I spend in a given month on gas so I imagined I'd guess and adjust a bit for 3-4 months?

Some things I know as they are the exact same every month like dog daycare and baths for my pup, rent, cable, etc. utilities vary from $70(an all time low woohoo)- over $250 in the summer.

Does YNAB help you figure out how to budget? Lol I'm so ignorant in this area.

The software itself doesn't, but the forums are VERY helpful. There are also free getting started classes
And the app makes the process very automated. Once you've used it a bit, it uses GPS to autopopulate, so if I'm standing in the check out at Whole Foods, it knows to categorize the purchase as "Groceries" and that I'm probably using my AmEx. I enter the transaction and it immediately shows me how much I have left in groceries.

And a fundamental part of YNAB is to roll with the punches -- so yes, especially starting out, we just guess and then make adjustments as things happen.

Typically, YNAB encourages you to start with your bank balance, right now. Ask yourself, what must this money do before I get paid again? So, you "assign" $70 to utilities, and assign however much to dog care. Rent, cable, phone, etc. Then guess on things like dining out, groceries, and gas.

Then, try to think about longer term things. Is your car insurance due in 4 months? Set aside 25% for it now.

Disney trip next year? create a category and start saving.

Then I started thinking longer term -- home repairs, car replacement, retirement savings, etc.

Several people on the forum share their budget for feedback -- or just looking at what others shared has helped me a lot. We just absorbed almost $3000 in vet bills without taking on any new debt AND while leaving our Emergency Fund savings in tact. There is NO WAY we would have been prepared to do that before YNAB.

 

[DisneyCowgirl]

I have done this We kept a spreadsheet (saved on Dropbox so both spouses could access it) where we tracked everything we put on the card and categorized it into the different "envelopes." Once we reached the spending limit, we just knew we couldn't spend any more that month.

It takes more discipline than the actual envelopes I think, but I just couldn't deal with paying only in cash. A benefit is that now we have a listing of how we spent our money each month which helped as we tweaked our budget, determined how much we could spend on a house to move out of the suburbs, etc.

 

[DisneyCowgirl]

OP here, thanks everybody! I'll look into YNAB.

Whatever makes it the most automated is the most likely to stick with me. I have a very low tolerance for things I find tedious and will revert back to whats worked 'well enough' lol.

I admittedly don't do any tracking other than to check my credit accounts online-I actually use an app that tracks them all (I'm not overly worried with linking card accounts on something supposedly secure-there are far more likely places for my info to be compromised).

I have so many cards it's easy to lose track so having them all in one place works well for me. I've never really budgeted before so I imagine there's some trial and error?

I mean it's not like I can say "sorry my gas 'envelope' is empty so I'm not coming to work" or not eat because I can't go to the store. Or do people do this?!? I have no idea what I spend in a given month on gas so I imagined I'd guess and adjust a bit for 3-4 months?

Some things I know as they are the exact same every month like dog daycare and baths for my pup, rent, cable, etc. utilities vary from $70(an all time low woohoo)- over $250 in the summer.

Does YNAB help you figure out how to budget? Lol I'm so ignorant in this area.

It took us a few months to get all the "envelopes" right. At the beginning we made sure to allow a cushion--we handled that by not getting any personal fun money in the first few months. But after about 3 months, we had it so precise, we could guess to within a few dollars how much we'd be spending on gas next month.

 

[smiths02]

It does kind of defeat the purpose. People tend to spend more on credit cards, and you can get behind on credit cards (not so with cash).

Anyhow, I just do a microsoft word document with income and expenses. I print this out at the beginning of the month. Most categories are a certain bill that is pretty fixed (or I can make a good estimate). I have 3 variable categories, groceries, car expenses (gas), and everything else (misc)...over time, I have worked on getting things out of misc. For those three, I have a separate sheet of paper where I write what I spend, but I also have an idea, if my grocery budget is $400 and I go to the grocery store weekly, I need to spend $100 to meet that goal. Then I know if I don't meet that goal, I need to cut back somewhere else.

 

[ellochka]

We have done it with checking accounts and debit cards, but it is certainly possible with credit cards.

Here are the steps:

1. Define your budget categories. Do not split items you buy in the same store into different categories. I know, sometimes you want to split beauty products and groceries, but if you buy them in the same place, keep them together. Your sanity is worth it.

2. Don't forget to classify "rare, but inevitable expenses" into categories. Car repairs, home repairs, medical expenses. They will happen. They need to be budgeted for. Take your expenses in the category over the last couple of years for the ballpark.

3. Define your budget for each category. Define how much you will be putting into each category from each paycheck. We use different checking and savings accounts for those, but you might be able to get away with a couple accounts.

4. Define each card you will be using for each category, your monthly maximum, and which account it will be paid from. I usually draw a diagram where all checking an credit accounts and budget amounts are drawn.

It take a little to get the hang of it, but it can work. The point, obviously, is to stick to the budget.

 

[kymom99]

I took a free budgetting class and they told us to spend a month collecting receipts and logging expenditures. That way you know what you spend on gas, etc. in a month. Then you can figure out how much to allow for those expenses, and you can decide if you need to cut back. to the poter who asked what if the gas money runs out, I think the key would be in planning ahead. If you know you have an even or obligation coming up where you will drive a distance, put extra money aside for it. If you are running low, cut out a couple quick trips around town that arren't necessities. For example, in the fall my son runs cross country. The meets are all over the place and we drive a lot during this time. I have to plan ahead for this, knowing I need a little more money in the budget for gas, eating out, etc. It is unavoidable.

 

[threeboysmom]

I mean it's not like I can say "sorry my gas 'envelope' is empty so I'm not coming to work" or not eat because I can't go to the store. Or do people do this?!?

Not exactly, BUT as the month is progressing, I can take a quick peek at how my categories are doing and make adjustments as necessary.

For instance, if it's only the 2nd week of the month and I'm already up to $125 in gas, I know I have to really cut down on any incidental driving to conserve the gas for commuting to work.

Or if my son asks if we can go out for pizza or whatever, I can quickly look at how we're doing in the food category. If we're in good shape, I can say yes... if the money is getting close to the limit, it's a no.

Tracking everything DEFINITELY helps me live well within my means, even with credit cards. I have never carried a balance or paid a penny in interest in all the years I've been doing this. But it's only because I'm disciplined enough to stay within my budget limits.

 

[FairestOfThemAll37]

I took a free budgetting class and they told us to spend a month collecting receipts and logging expenditures. That way you know what you spend on gas, etc. in a month. Then you can figure out how much to allow for those expenses, and you can decide if you need to cut back. to the poter who asked what if the gas money runs out, I think the key would be in planning ahead. If you know you have an even or obligation coming up where you will drive a distance, put extra money aside for it. If you are running low, cut out a couple quick trips around town that arren't necessities. For example, in the fall my son runs cross country. The meets are all over the place and we drive a lot during this time. I have to plan ahead for this, knowing I need a little more money in the budget for gas, eating out, etc. It is unavoidable.

That sounds like a good place for me to start. I don't keep receipts. I pretty much chuck them immediately.

Is a good place to start with how much you want leftover? So the only reason I have any inkling to budget is for vacations!

I take a getaway (weekends and 3-day mostly, 1 week 2x/ year) about every other month. I usually stick to the Caribbean and beaches cause it's easy and it's areas I hadn't explored. Now, I'm a bit bored and want to do more traveling abroad again so I'd like to grow my vacation budget by a substantial amount to account for the increase in travel costs.

Yes, I could not take so many small trips and throw the whole budget at one trip but I don't want to lol I need a little getaway to keep my sanity!

Is it better to work backwards from there or to start with the other stuff?

 

[threeboysmom]

Budgeting is fairly easy to set up regardless of what method you choose. Sit down with scratch paper and a pen.

Step One - first figure out if you want to budget weekly or monthly (or bi weekly)

Step Two - write down your income for that time period - it's imperative that your expenditures never exceed this amount!

You can't begin to budget and live within your means if you don't even know how much you have to work with in the first place.

Step Three - list all your FIXED bills - these are amounts that stay the same every month and have no wiggle room; ie, mortgage, insurance, car payment, cable, etc.

Step Four - subtract total of fixed bills from your income. This is now what you have to "play" with for the next step.

Step Five - list all your VARIABLE bills - this is the fun part of budgeting and where the bulk of your attention will go as you track your spending. Categories will include food, gas, utilities, and also things like toiletries, household, entertainment, vacation, savings, etc. Only you can come up with these categories - list everything you can think of. You can be as specific or as broad as you want. For years I only had 4 categories - food, gas, utilities, and miscellaneous, lol.

Step Six - assign amounts to each of those variables, keeping in mind that you cannot go over the amount from step 4. You must have some idea of how often you fill up your car? What a "normal" grocery trip cost? An idea of what electricity cost per month?

I actually put my savings category under the "Fixed" bills since that is a non-negotiable for me. However, if you don't treat savings as a bill, you will find it hard to save every month so keep that in mind.

Step Seven - adjust, adjust, adjust! You'll start out with ballpark estimates and adjust as time goes on. You'll learn as you go. I have to rework my budget several times a year as things keep changing on me.

 

[threeboysmom]

Is a good place to start with how much you want leftover? So the only reason I have any inkling to budget is for vacations!

I take a getaway (weekends and 3-day mostly, 1 week 2x/ year) about every other month. I usually stick to the Caribbean and beaches cause it's easy and it's areas I hadn't explored. Now, I'm a bit bored and want to do more traveling abroad again so I'd like to grow my vacation budget by a substantial amount to account for the increase in travel costs.

Yes, I could not take so many small trips and throw the whole budget at one trip but I don't want to lol I need a little getaway to keep my sanity!

Is it better to work backwards from there or to start with the other stuff?

That's actually a good way of looking at it. But you first have to do your fixed bills... and then include your "vacation" category as a fixed and you're good to go!

Let's say someone makes $5000/month and has $3000 in fixed bills. Set aside $500/month for vacation which then leaves you with $1500 to play around with for variables such as food, gas, & utilities...

 

[FairestOfThemAll37]

That's actually a good way of looking at it. But you first have to do your fixed bills... and then include your "vacation" category as a fixed and you're good to go! Let's say someone makes $5000/month and has $3000 in fixed bills. Set aside $500/month for vacation which then leaves you with $1500 to play around with for variables such as food, gas, & utilities...

I don't have any trouble living within my means per se. My bills get paid every month and I don't carry a balance in my CCs.

I just don't always like where my spending ends up at the end of the month. It's like I nickel and dime myself cause I'm just using one big 'non-bill' pot.

Hopefully this will help me prioritize a better vacation budget. It's really just laziness and impulsiveness lol. I want to save more but then just leave things status quo. Adding some structure will hopefully help!

You asked above about gas and that's one I honestly have zero idea about. I couldn't even tell you how often I gas up without looking online at my CC stuff.

Groceries are a HUGE spend for me and an area where I could probably cut down to a point, but will always be a big category because of how I eat. At least, until our whole food system changes lol.

 

[rachelsmom97]

I also would recommend YNAB. We started using it last March. It took a couple of months to get used to the system and to refine our budget categories, but it has been amazing. We use our DV for almost all purchases as we are going on a b2b DCL cruise this summer. This is such an easy way to keep track of credit card charges. Also if you use their mobile app, you can enter a purchase in about 30 seconds. So easy when I am out shopping to just enter the purchase in the minute I buy something.

Be sure to do the free trial and take all the free webinar classes they offer. Every class they give away a free copy of the software. I won a copy on my 28th day of the trial, but I would have paid for it if I had to.