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DH is on-board with the budget review!

February 19th, 2007 at 03:07 pm

Hooray! In the middle of January I asked DH to sit down with me twice a month and go over our envelope balances. I did this because he had made a joke that I was beating him over the head with Mvelopes, and I realized that our budget had always been a one-woman show. After the 2nd review he made the comment that he liked the system and it was really going to keep us on track, and after our 3rd review he asked if I wanted to do it weekly instead of twice a month! I actually prefer twice a month but it was nice that he was so enthusiastic.

DH has a fiscally sound mindset to begin with, which makes a big difference, but before we started the envelope system we had trouble communicating about our spending priorities and where we stand financially. I think what makes this system work for us is that I print out the envelope balances and highlight just the ones we need to talk about -- anything that is in the red and the progress toward goals that DH really cares about. This makes the discussion go very fast. Every time one of us mentions wanting to buy a big-ticket item, I create an envelope for it. We don't necessarily fund the envelope, but it makes it easier to talk about prioritizing. For instance, we recently decided to move all the "landscaping" money to "laptop" and "US vacation". DH regularly asks me if we have enough money in the envelope to buy the laptop yet, and seeing the envelope grow from month to month is very motivating.

The default catagories in most budget software group things by "Auto", "House", "Household", etc., but I find it useful to do something a little different. I based my catagories on the All Your Worth system of dividing money between needs, wants and savings. Further splitting the wants and needs between "monthly" and "accruing" makes it really easy for me to do a sweep of extra funds from just the "monthly" envelopes at the end of the month. Before I split them this way I had to look at every envelope each month and decide which to sweep and which to let grow. In the utilities envelopes I do carry over $10-$25 to the next month, and only sweep above that amount.

The "misc" envelope deserves special mention. I've found over the years that it's hard to predict what I'm going to spend each month at places like Best Buy, Linens -n- Things, the post office, etc. I might buy nothing several months in a row and then make several purchases in a row. I've decided that it doesn't matter exactly where we spend the money that goes to those places, as long as the total isn't more than $300 a month.

DH and I each have a "free $$" envelope that can be spent on anything we want. In keeping with All Your Worth I make a distinction between a basic grocery allowance in "Monthly Needs" and the "fun" food (and alcoholic beverages) in "Monthly Wants".

The envelopes that tend to go in the red most often are "dining", "food", "misc", and "clothing zetta". Usually "cash", "home depot", and "target" have enough extra to cover the first three, and I transfer my free money to "clothing zetta". A purist would insist that we never make a purchase that would cause an envelope to go red in the first place, and if money were tighter I would follow that philosophy. As it is I feel comfortable with moving money between envelopes in the "monthly" catagories to eliminate red at the end of the month before I sweep the extra funds into one of the "big-ticket" envelopes.

I regard the "emergency fund" as untouchable unless DH gets laid off, so the "basic savings" is sort of a "baby emergency" fund. It was very welcome when I discovered we were going to owe on taxes this year. I'm still trying to decide how much we should keep in it. The "emergency fund" has two months of all spending -- counting the month-ahead funding we really have three months worth -- if we cut out all wants and savings this would stretch for 5 months.

We are able to fund the envelopes a month ahead -- DH's two Feb paychecks sit untouched until after I do all the bookkeeping on March 1. If you are living paycheck to paycheck I highly recommend saving a month's spending so you can switch to month-ahead funding.

Here are my catagories:

Monthy Wants
baby stuff
cash
cleaning
dining
food (above basic groceries)
home depot
misc
netflix
target

Accruing Wants
clothing DH
clothing zetta
free $$ DH
free $$ zetta
charity
gifts

Big-Ticket Wants
landscaping
laptop
laundry cabinets
vacation US
vacation overseas

Monthy Needs
car fuel
car loan
grocery (basic allowance)
home HOA
home mortgage
utilities cell phone $10
utilities gas & electric $25
utilities phone/dsl/satellite $10
utilities water $10

Accruing Needs
car insurance
car registration
home insurance
home property tax
professional membership
life insurance
medical
vision, dentist

Savings Investment
ROTH contrib
investment contrib

Savings Reserve
basic (ie baby emergency/slush fund)
emergency fund
car repair reserve
home repair reserve

2 Responses to “DH is on-board with the budget review!”

  1. monkeymama Says:

    I like the flexibility of moving things between "envelopes" personally. IF one goes int he red, eh, when others are in the green. LEss stress...


  2. livingalmostlarge Says:

    Do you find it easier to use cash envelopes or do you us CC and track it by excel? I've found it easier to use CC for everything and track it with excel. I input daily our spending, I have such a hard time with cash. DH takes it out and just spends it poof $40 is gone. arrgh.

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