We're attempting to budget. And by that I mean trying to put a little money aside each paycheck to pay for bills we know we'll have in the future. Sounds simple, right? Well we've NEVER done this. Never. We get bills that are seasonal (oil) or once a year (car tax) and we're ALWAYS surprised and shocked. See, we're very good at the monthly bills. We have a calendar where each paycheck is already pre-designated for certain expenses. But for those every now and then bills... or unexpected bills... we have nothing. So I've started something called "The envelope system". It's where you have envelopes for certain expenses and you put a little money in each of them so when that expense pops up, you have the cash. I'm sure EVERYONE is familiar with this concept, but as a "If I have a penny, I will spend that penny" kind of person, this is not something I'm normally good at. So I have four envelopes.
1. Oil (Like I said - this bill comes every time we get our tank filled in the fall and we're ALWAYS surprised. No more, maybe I'll have some cash to pay it by fall of 2009!!)
2. Car Tires (I've already replaced 2 tires on my Jeep, and I know I'll need to replace the other 2 at some point. Might as well put some money aside NOW so we don't have to charge it like we did previously).
3. Daycare (We already have a nice chunk set aside for that unholy cost of daycare, but we'll need more. I figure I'll start setting some cash in an envelope for this now so we're not caught short and out of options.)
4. Fun (Now this seems silly, but I tend to leave myself out of the equation when budgeting. I'm all or nothing kind of person... and like if I'm on a diet I'll do really, really well for MONTHS and then one day I'll freak out that I haven't done anything nice for myself and I'll go crazy. By putting money aside for "fun" like say getting my haircut, or a pedicure, or maybe some non-maternity clothes, or... be still my heart... a new pair of shoes!!! Maybe I can stop this cycle of good, good, good... CRAZY!!!!)
I'm sure I could get even more detailed with the envelope system, but this is what I'm going to start with. What do you think? Does it make sense?? And what do other people do with budgeting for unexpected or non-monthly type bills??? Feel free to share, we need all the help we can get!
1 comment:
This is an admirable way to bring discipline to finances. Kudos!The only downside I see is that the cash sitting around the house in envelopes is a bit unsafe, and is unproductive (it isn't earning any interest).
One alternative to implementing the same system is:
1) put the cash in a bank account instead of the envelope
2) put a slip of paper in the envelope saying how much money has been tucked away
For bloodless people like me, this is mathematically equivalent to your system. For human beings, the psychological difference is significant:
a) An envelope with slips of paper gives no positive feedback, no sense of accomplishment toward saving for some goal.
b) It's difficult to look at the bank account and say that there's no money there (it's all earmarked for savings projects) when you can just look and see the money right there.
The bottom line is that the system seems to be working the way it is. When it gets to be big bucks, you might consider tweaking it a bit.
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