An effective budgeting system

An effective budgeting system

My mom taught me her budgeting system years ago. It's the envelope method wherein you divvy up your income among your categories/expenses and literally fund those envelopes with your cash for your expenses. When your envelope is empty, it means you've used it all up. It's a really effective sytem - one that works for me.

The problem I had though is how to work it for me in my life right now. DH and I hardly carry around cash. We usually pay with a credit card and pay the full balance at the end of the month. A few years back, I devised a method using Excel which for the most part was effective as long as I remembered to input each and every expense. The thing was, life got busy and having to input each and every transaction just got darn too tedious!

I found Mvelopes a while back and I thought it was crazy to have to pay for a service that I could do myself (my Excel method). Fast forward to 2008, and I am all over it. There are free services like Mint and Quicken online but I am gladly paying for this subscription because it has just made my life easier. And I am not one who will pay for something I don't think is worth it. For me, this works. The ease and convenience makes it all worth it for me. I actually look forward to budgeting our money. LOL! One thing that makes it so easy is that they're able to download the transactions directly from your credit cards/financial institution so you don't have to input your expenses nore your income manually. And you can even split your expenses into several different categories. For example, when I go to Target, I buy stuff for household supplies, clothes for the kids, grocery or personal spending. With Mvelopes, I can split that single Target bill into all these categories/envelopes.
With my excel method, I was starting to get headaches because I had to check and double-check my numbers, making sure my sums were referencing the right cells. Headache galore. If we were really struggling, I'd still use that method and do it the hard way. But since we can afford this subscription now, why give myself a headache eh?
One of the things my mom taught me too was to divide annual payments into 12 months so that when it's time to pay for it, you'd already have something put aside instead of being caught off guard. For instance, with our life insurance premiums, we pay that only once a year but I've added both DH and my premiums and divided into 12 so that each month, I set aside that amount into our mvelope category. When it's time to pay up, I'll have the exact amount I need. I do this also for the car registrations, the car insurance premiums, our home insurance and also travel/vacation expenses and holiday gifts. It makes it seem like we're in a tight budget since every penny is literally accounted for but I think that it is very helpful in making sure we're living within our means.