Thursday, September 17, 2009

Why I failed at envelope budgeting

For the month of September I was going to try the envelope budgeting method. This is where you take cash and put it in envelopes for your various expenses and once it is gone, it’s gone. I am still getting used to my take home pay amount and don’t have an official “budget” to go by, but I figured I would just pay all my bills online and then take the rest out in cash and split it up amongst the envelopes.

I deposited what I thought would cover my bills and took the rest out in cash.

First I had to get a certified check to pay my speeding ticket.

Then I sat down and paid my bills- mortgage, HOA dues, electric, gas, water/trash, cable/internet, and cell phone.

Then I took some of the cash I took out and deposited it in my Money Market account to pay my car payment. (I hadn’t done this since I bought the car back in April. It was just draining that account down to nothing!)

Then I got 2 other bills I wouldn’t get normally. One was my AMEX bill for the J Crew dresses I bought for church and the other was one from my Limited card for some jeans I had bought because I was seriously down to just one poor pair of jeans. At the time I bought these I didn’t really have enough money to cover them in checking, so I figured I’d just charge it and pay it off with next month’s paycheck.

I NEVER carry credit card debt because back in college I got a lesson in how quickly that interest can make it get out of control and you really start to feel like you are never going to pay it off.

Then I remembered I had to write a check for my health insurance.

So I added up the amount for the health insurance and 2 credit card bills. I went to my cash stash and started counting it out so I could deposit that back into my checking to cover these bills. When I got done, I had one $20 bill left! I looked in my wallet because I knew I had put a $20 in there when I first got cash out. There was a $10 bill and some change.

I decided I didn’t want to split up the two poor little bills I had left so I just stuck the $20 in my wallet.

I have $9 left of that now.

I don’t get paid again for 3 weeks.

So much for envelope budgeting!

Something is going to have to change in October...I am thinking about cutting off Time Warner, (they've been bleeding me dry forever anyway) going with Dish Network or something and living without internet at home. Any other suggestions?


heidi said...

I'm scared to try envelope budgeting, so kudos to you for trying!
Honestly, I can't NOT have internet at home, so I get that through my cell phone provider with one of those broadband card thingys. And...I don't have any cable (gasp!). At all. I don't even get the free channels you get when you plug in your cable to the outlet. At first that was tough, but money was too tight when I moved 2 years ago and now that I moved again and just bought a house. Yup, I've survived for 2 years. I watch some of my favorite TV shows online and I do get Netflix so I can watch other shows, movies, etc on DVD (and Netflix online too). It's an adjustment for sure, but I read more and do other things. For the most part I don't miss the TV! (except Food Network and HGTV sometimes).

Akirah said...

Hmm. I'm trying small things. Are you using coupons? Can you use energy saving light bulbs? Can you lower your minutes on your cell phone? I cut out Netflix, but if you're cutting down on cable, you might want Netflix so you can see your shows.

Can you shop at thrift stores? Or maybe do some clothes sharing with friends when you're craving a new look?

I don't know if any of those ideas can work for you, but those are things that I've been doing lately. It's helped. The small things do add up.

Themis0307 said...

I feel you, honey. I tried envelope budgeting for a while and it worked until life changed and I had no extra cash after bills. I am desperately trying to find a way to generate some extra income because I have cut out all I can. I tried living without internet for a while. In an apartment, it worked fine because I could always find someone who didn't secure their connection (yes, I'm was a pirate; I stole internet) but when I moved into my little duplex, that stopped. I got a deal with Verizon Fios for cable and internet that was cheaper than just the internet alone. Look into it. I have been more than pleased with them so far.

Sonja said...

I did the envelope method in college and it worked great. I waitressed though and so all my money was in cash. I broke it down weekly and wrote on the envelope how much I would need to put in each week to have enough money to pay the bill at the end of the month. I also over estimated and then put the extra in to savings. For example, if a bill was 47, I rounded to 50 and then put the extra away in case I would need it at a later date.
Sounds like the only reason you were cutting it close was because you had some unexpected bills.
One bit of advice I have - though you might already do it - is have a "fun money" envelope. This is a set amount you get to do anything that isn't paying a set bill. Going out to dinner, buying clothes, taking a vacation. Only use that money to do those things and save everything else. If you don't have enough, "fun money", don't do it. I think the way my budget can get away from me is doing little things like going out to dinner that can add up unexpectedly. The cable bill is predictable but how much you will spend on a night out is not unless you define the boundary in advance.

Erin Kathleen said...

What's cash? That's one thing we never have because we learned it gets us in trouble. What we do is charge everyday purchases, gas, food, ect, onto our Discover Card and make one payment a month. Also we get cash back with teh Discover Card and it's about $20 a month. I don't know how we did it but by doing it this way we ended up having over $1000 extra in our checking account. So when the escrow shortage came we didn't have to tap into savings.

heyLyss09 said...

It took me a while to get a method down that worked for me. I calculated all of my monthly bills, and divided it by 2 (the number of paychecks I get a month) then I put that amount in savings. I keep the leftover money in my checking account, throw a little bit in my 2nd savings account if I want, and just transfer my bill money over to checking when each bill is due.

That sounds so confusing but it's been working out great for me because I know my bill money will always be there even if I spend everything in my checking.

Carolyn said...

The envelope system is definitely hard, esp. when unexpected expenses arise. But it is soo helpful, too! I canceled my cable awhile back (which helped b/c cable for 1 is SO pricey) and obviously had to cut back on other stuff (but I was spending way more than you). Try it again next month!

Shoshanah said...

I don't normally use cash. About once a month I'll take out $40 or so, and that normally last me till the next month.

As crazy as it may sound I put most of my purchases on my credit card. I really only do this to earn my rewards cashback, and pay everything off everything month. Since I'm not paying any interest this works well for me. But I could see you it could easily be quite deadly.

Amber said...

I suck at envelope budgeting. In fact, I suck at budgeting in general! Two years ago I made a vow to myself not buy anything with credit and I haven't broken it yet! Everything I buy is with cash! I'm so close to having all my credit cards paid off and it feels great!! :)
Just came across your blog today and I love it! So cute! We have very similar interests in books! I love your reviews!

AnnQ said...

Oh, man...I'm sorry to hear you're having budgeting issues! It can definitely be a challenge...