Saturday, November 7, 2015

My Computerized Envelopes.

I've mentioned before (countless times) how we are participating in the FPU or Financial Peace University Baby Steps.  As a result of our participation we were out of all debt with the exception of Mortgage as of August 14 2015.  We figure we paid about $32,000 dollars of debt over the course of 4 years.  Not as lofty as some debt free screams; ours was more of a Woohoo, a debt free hollar at least.  Since that time I've been able to leave my job and stay home.  I still deal with times of "Should I have left my job", but Dh has reassured me this is the best.  It has alleviated some of his responsibilities at home which has been good because lately he's had to work more hours.  It's also helped in having to cart everyone all over creation.  Since I've left my away from home job I've had to deal with a shower repair, a refinance of our home, a roof repair, and other various things which would have required me to be home certain days of the week.  This tells me I made the right decision.

Even though I'm convinced this is the best thing, I still have the need to make sure all financial needs are met and then some.  We can't just get by.  We have to be able to save for emergencies as well as retirement.  As a result of those concerns, I have taken Dave Ramsey's envelope system to heart but with a twist.  I made use of our Quicken program to set up "envelope accounts".  My checking account and budget cover the essentials of food, shelter, utilities, gas, etc; although within that Checking account, food and gas have an envelope of their own.  I deduct from my checking account the amount budgeted for food and gas.  As we use our debit card for food or gas purchases, I alter the amount deducted from the checking account (after I add the transaction of course).  Let me explain.  I budget $100 for gas every two weeks.  I will then deduct that $100 from my Quicken Checking account.  It becomes a place holder so to speak.  The amount has been taken out technically in my Quicken Checking Account, but it still physically remains in my actual bank account.  Say I then go to the gas station and fill the gas tank up for $20 using my Debit card.  I come home and deduct that transaction like I normally would a debit to the account, but I then adjust my initial "set aside" of $100 to $80.  I do this same thing for my grocery money. The "Envelope Accounts"s are for other things we will need to be saving for.  I have one for Car Insurance, Emergency Fund, Income tax, Clothing, Vet visits, Tags for the car, Car Repair, Power bill, and Water Bill.  We even have a Roof Fund account to save to replace the roof.  Each payday, once the budgeted bills are covered: I then transfer the left over funds to our savings account at the actual bank.  In my Quicken account those funds are first transferred to our savings account and then divided into the "Envelope Accounts".  

Now some of you might have read thru my list of accounts and noticed a "Power bill" and a "Water bill" account.  Those items are part of normal budgeting of utilities so why have a separate envelope for them?  Well I have an answer.  We do our own budget billing for those bills.  I took an average of each bill over the course of the year.  Our power bill averages $235 a month and our water bill averages $50 a month.  I budget that amount every month.  If the bill falls under that I transfer the difference to our savings account and place it in the appropriate account.  If the bill comes in over that, I pull the needed funds from that account back into the checking account to cover the difference.  On the anniversary of the budget billing for each account, the funds left over (if any) are moved permanently to the emergency fund to stay.  The yearly average will be reconfigured and a new budgeted amount will be created( again if needed).  This gives me an incentive to keep these bills down so I come in below and have money left over.  The advantage of doing my own budget billing as opposed to setting something up with the power company, is that I have control over my money.  I earn interest on the money I'm holding back and in the case of an emergency I have access to the funds instead of waiting for the power company to send me a refund at the end of the year.  Not to mention the fact that having the money in my possession at all times makes me want to keep cost down rather than not caring what the power use is because my bill will be the same.  It makes me more cognizant of the dollars leaving my hands, much like when you use cash to make purchases.

Needless to say I am a bit of a bill nerd, but so far so good.  Each family has to do what's best for them.  We have discovered this is working for us.  I hope I haven't confused you too much.  If I can clear anything up, let me know.  What are some ways you handle your budget?

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