Budgeting - Envelope system

[Bobby_M]

I'm lucky that we don't have to live on a strict budget for two reasons. First, we have enough reserves that we're not going to come up short on any given month. Second, both my wife and I area extremely thrifty on our spending. We always discuss purchases first and nothing is unexpected. I HATE carrying cash. I lose things too much.

Buying on credit is powerful. Dangerous for many people, but powerful. Think about the current lending crisis and how tight the banks are with their money. THAT is why the market is tanking because real business requires credit. It's called leverage.

I bought my first house when I was 21 and I borrowed 116k to buy the 128k house. 5 years later I sold it for 240k and owed 110k of that back. If I would have waiting until I could pay cash, it would still have been out of reach and I'd be renting an apartment 11 years later instead of rolling that equity forward. Sure, tell that to people who took those 100% financed ARMs at the peak of the market... I'm not really talking about them.

 

[Ryan_PA]

I'm lucky that we don't have to live on a strict budget for two reasons. First, we have enough reserves that we're not going to come up short on any given month. Second, both my wife and I area extremely thrifty on our spending.

The purpose of our budget is not because we are cash strapped or not thrifty, quite the opposite. It is all about long term planning. My wife and I are both 28. We plan to retire early, pay for my daughters college and wedding (she is half greek, so that will be huge). The budget allows us to live to our standards, knowing we are set for major life events, both planned and otherwise.

 

[wildwest450]

P.S. your mom should get royalties from Dave Ramsey

I agree. She also bought us 6 month's of renter's insurance as a wedding present, with the promise we would keep up the policy. I wasn't impressed.

A year later our rented house burned to the ground at midnight, with us barely escaping. It turned out to be a $20,000 present.

 

[The Pol]

My wife and I are not cash strapped by any means either, like I said, we SAVE 24% of our income, but still live on a strict budget... why? It is proven that if you have a budget that accounts for what is going OUT, a lot less goes OUT. Budgeting is knowing what you have, and what you give away, precisely... not about keeping your head above water.

 

[Bobby_M]

Frankly no matter what your process or tracking mechanism is, the end result should always be spending less than you make. Envelope, software, jotting notes, whatever. There needs to be more of that kind of thinking and much less BS self entitlement.

 

[talleymonster]

What, may I ask, is the envelope system?

 

[Donasay]

If you are a debit credit card user, use quicken online to do your budget for you. It downloads all your transactions from each card and coordinates with your bank so it makes cool pie charts to show how you spend your money.

 

[nealf]

What, may I ask, is the envelope system?

Basically you write out a budget (or decide some other way) a monthly amount that you are going to spend on particulars. An example would be the grocery envelope would get $500, or whatever you decide, and that's all you can spend on groceries for the whole month... which really makes you rethink impulse buying.

Neal

edit: Here is Dave Ramsey's explanation of The Envelope Budgeting System