"Envelope system" with credit cards?

[ellochka]

Just for the reference, here are our categories:

1. Long term savings. IRAs, 529s, taxable savings. Taken automatically on 1st and 15th out of our main account.

2. Non-negotiable bills. Mortgage, daycare, utility bills, home insurance. Special account for that.

3. Vacation savings account It's a separate saving account. Vacation itself is paid via a credit card, and then paid off from this account.

4. Short term savings. It's actually a checking account. Large irregular bills. Medical, car repair, home repair (but not improvements).

5. Living expenses. Groceries, gas, kid stuff.

6. Discretionary expenses. Eating out, clothes, toys, electronics, entertainment, home decorations and improvements. Niceties we can easily cut down on.

Over time, categories 5 and 6 collapsed together, but we did keep them separate for years when our budget was tighter. The points is not to spend your gas money on discretionary items.

 

[dpswift]

It seems nowadays CCs are billed quickly. Every few days you could check your online app or call the CC info number to see what your balance is on that card and go from there.

I understand your need to keep it simple. I need simple too. For me I have found that cash works best. It is too easy for me to overspend when I use CCs. There is a reason why stores want you to get their card. Research has been done that shows people spend more using credit than cash.

 

[pryncess527]

Despite all the alleged research, (which I never seem to be able to actually find . . . just articles reporting it, but no actual research publication that explains methodology used to reach their conclusions) I personally find cash burns a hole in my pocket. I am MUCH more willing to buy something with cash than pull out plastic. Maybe I'm just the odd one.

Regardless, if you have implemented a zero-based budget system, in any form, then it does not matter what form of payment you use. You see the impact on your budget the second the purchase is made, regardless of when the bill is due. The money I spent on groceries yesterday went on my AmEx, but it was removed from my grocery budget category immediately. I saw the impact immediately. The zero-based system forces you to be thoughtful about the decision making.

Before technology made it easy, cash was just the only practical way to manage a zero-based system. Now, while some may prefer cash and that is perfectly fine -- there is absolutely no reason why you can't operate a zero-based budget using a wide variety of technological options. I just consider YNAB the best, because it's software was designed specifically to implement a zero-based budget philosophy, so everything about the software and app reinforces that behavior.

 

[SirDuff]

Despite all the alleged research, (which I never seem to be able to actually find . . . just articles reporting it, but no actual research publication that explains methodology used to reach their conclusions) I personally find cash burns a hole in my pocket. I am MUCH more willing to buy something with cash than pull out plastic. Maybe I'm just the odd one.
Regardless, if you have implemented a zero-based budget system, in any form, then it does not matter what form of payment you use. You see the impact on your budget the second the purchase is made, regardless of when the bill is due. The money I spent on groceries yesterday went on my AmEx, but it was removed from my grocery budget category immediately. I saw the impact immediately. The zero-based system forces you to be thoughtful about the decision making.

Before technology made it easy, cash was just the only practical way to manage a zero-based system. Now, while some may prefer cash and that is perfectly fine -- there is absolutely no reason why you can't operate a zero-based budget using a wide variety of technological options. I just consider YNAB the best, because it's software was designed specifically to implement a zero-based budget philosophy, so everything about the software and app reinforces that behavior.

No, you aren't the only one - there are at least two of us! I think, for me, part of it the "scare" factor of seeing a credit card balance go up!

Totally agree with the rest of your post too - with YNAB (or whatever system you use), the zero balance/envelope system works just as well however you are making the purchases.

 

[threeboysmom]

Despite all the alleged research, (which I never seem to be able to actually find . . . just articles reporting it, but no actual research publication that explains methodology used to reach their conclusions) I personally find cash burns a hole in my pocket. I am MUCH more willing to buy something with cash than pull out plastic. Maybe I'm just the odd one.

Not alone! I find it so much easier to spend cash than I do plastic. I CANNOT have cash on me - I feel the need to spend, lol.

Using a credit card keeps me reigned in.... which is a good thing!

 

[sunshinehighway]

I'm another person that tends to spend more when I have cash.
I find the easiest way to keep track of spending with credit cards is just what someone posted up thread, check the balances on my phone and pay periodically instead of at the statement close.
The charges may take a few days to post but the pending charges are deducted from your available balance so it's fairly easy to know how much you've spent.

 

[staceyeileen]

Does YNAB automatically connect to your CC account? I can't deal with importing files like the old days.

 

[SirDuff]

Does YNAB automatically connect to your CC account? I can't deal with importing files like the old days.

I think that it can (though I didn't). But you'd only do that to set up. Afterwards, you add in your transaction as they happen - not by downloading files from your CC account.

Admittedly, you might be able to do the download thing (I never tried), it's just that that isn't the point/plan.

 

[staceyeileen]

I think that it can (though I didn't). But you'd only do that to set up. Afterwards, you add in your transaction as they happen - not by downloading files from your CC account.

Admittedly, you might be able to do the download thing (I never tried), it's just that that isn't the point/plan.

Hmm. Darn. If that's true, it's definitely a non-starter for me. I don't have the patience to enter all of my transactions. Right now I use Mint and it always has a current list of all my transactions and it categorizes them well too. I just think it's lacking for budgeting purposes.

 

[pryncess527]

Does YNAB automatically connect to your CC account? I can't deal with importing files like the old days.

No, it does not connect automatically. I understand why some want that, but it's actually WHY I picked YNAB over Mint.

Entering transactions seems burdensome at first, but it's not nearly as bad as I thought. I have set up scheduled transactions for bills that happen regularly, so the only things that have to be entered are random purchases I make while shopping and with the iPhone app, that literally takes 25 seconds.

 

[ValpoCory]

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

Thank you for all your help in this thread threeboysmom. For families that Tithe 10% of gross salary off the top, or Tithe any amount for that matter, should we take "income" to mean take home income after taxes and Tithe?

 

[tzolkin]

Thank you for all your help in this thread threeboysmom. For families that Tithe 10% of gross salary off the top, or Tithe any amount for that matter, should we take "income" to mean take home income after taxes and Tithe?

From what you quoted, I would take "income" to be what you have available to spend.

The way I do it is take home pay. (Taxes, health insurance, etc already deducted) That is the income I use to calculate our budget, not gross.

I list tithe as a recurring bill-- like mortgage, utilities, etc, because it is a set amount each month. All the set expenses are subtracted from the net income and then you see what you're left with to spend and you can divide those categories however you decide.


Also, when we have extra left over each month I transfer that exact amount into a separate savings account for vacations. This has helped us to keep motivated to do the budget and to keep our spending in check because we enjoy watching that amount grow each month.

 

[TnTWalter]

by clicking a button in Ynab. It's really easy. If I've already typed them in it tells me and skips that transaction.

Did anyone mention the app for your phone so you can enter while out and about.

 

[FairestOfThemAll37]

OP here-

Thanks for all the help and advice!

I've decided to give this a try with mint as it links right to my accounts which is just easier for me.

I'm excited to see how this works out for February!

I started a couple weeks ago but since I made the budget after a bunch of January spending it's a bit off kilter especially with the 3k plane ticket I just bought :/ not exactly a typical budget month for a baseline!

 

[MommaBerd]

A little late in the convo, but similar to you, OP, I just want to get a handle and a better idea of how we are spending money. We are straight-up CC users and we pay it off monthly, and my DH pays the bills. I'd like to start being much more proactive in managing our money and be a better steward of it - not just spend without thought.
Not much to add to the awesome advice, but I do want to throw another app into the mix, I recently downloaded Goodbudget - which sounds very similar to YNAB. (But with a cute little character. ) I only use the envelopes on the app for flexible spending. It can be synced across devices and computer. I'm just learning it, so I don't know if you can link it to your CC account. Anyway, here's to getting our financial homes organized!