Well Thursday was payday. And that means... I am filling up Ye Olde Envelopes (photo is of some of my actual envelopes and my actual money). And then I left work and went on vacation for a few days. ahhhhh.
Last time, I had just finished explaining that my first toe in the water of my envelope system came with the Quickie Budget. With the QB in had, you are moved a smidge closer to a cash-based budgeting system. to wit - you don't just jump in out of nowhere.
A friend of mine is in bad straights and she was persuaded to sign up for FPU. I am hoping the class gives her some peace about her money, because she is not at peace right now. Thus, I want to continue with my own story. How I Got From There To Here.
How To Get The Money In The Envelopes, Part Two.
I had done my QB and it was the end of September. Payday was not exactly on October 1, so doing a monthly anything just seemed beyond me. So I started small. Real, real small. Itty bitty.
I started with one paycheck, and with only a few categories.
I had not been grocery shopping at an actual grocery store for quite some time. I gave myself the small goal of buying enough food just for taking my lunch to work, and some snacks for home. As I've mentioned, I don't really have cooking privileges where I am living. Not even a microwave. I miss cooking, but it is what it is. So this was a h - u - g - e step for me.
I say this because, for anyone, there is going to be something huge. Something you don't know how to get past. This was one of mine. We all have these things and we all have to work them out. Maybe for you it's just reducing your grocery costs. Maybe it's shopping at Aldi. Maybe it's clipping coupons. Maybe it's online shopping, buying gas at the pump, whatever. In fact, maybe it's the Husband. I didn't have that particular problem, but we all have something. You have to just get past it.
I went to to grocery store. A new one I had never been to, which also helped break me of my old, bad habits.
I went to the ATM and I paid the fee to withdraw the maximum, which is $300. I knew from my QB that I would still have enough left in there for the bills I had to pay. I picked just 6 really easy categories to move to cash, and I had no real idea how much to put in some of them.
• Food (all food, including Starbucks, pizza, eating out - not just groceries)
• Gas (any transportation costs - el fares, taxis, tolls)
• Personal (shampoo, tampons, toothpaste, etc - many people lump this into grocery shopping)
• Health (copays, prescriptions, cold medicine, cough drops)
My kit came with 6 envelopes. So I labeled them with these names. This was me, sitting on a bench near the service desk at the new Meier in town, labeling envelopes and putting cash in them. Possibly not the smartest move but that's what I did.
I knew how much rent would be, so I put some money for that in there. Not all, but some.
I estimated $120 a month for Gas, based on prior fill ups. I put $60 in there. That was short, since I did not account for taking the CTA sometimes, taxis, paying for parking, tolls, etc. That's ok.
I have some regular expenses that fall into the Personal category, but they are not monthly. I worked out how much those were per month (estimate) and I ended up putting $45 in there. The envelope would then acquire more money next month and so on, until I needed it. I forgot to account for things like maxi pads and shampoo. That was ok.
Health is about $100 a month due to some on-going issues. I put $50 in there.
I arbitrarily decided on $400 a month for food. I really had NO idea. I figured I could knock it down over time. But at the grocery store that day, I was only looking to buy 1) LUNCH items and 2) SNACKS. So I put $100 in that envelope. The rest, I put in the Savings envelope, since it was overage.
Then I took a scrap piece of paper and made a short list of items I was looking to buy. If you have a regular grocery trip and amount, see, you are way ahead of where I was, just swiping my debit card all over the Loop to buy myself lunch and snacks every darn day.
I set off on my mission. I kept my list out and when I put an item in my cart, I wrote next to the name the cost of the item. And yes, I added some things as I went along, if they seemed like good ideas, or I knew I would eat these things. I did not want to have a big surprise when I got to the register. I was trying to change my behavior and really pay attention to what I was spending and on what.
Once I had gone through the store, I went back to the same bench. I sat there and I separated in my cart everything I NEEDED from what I WANTED. How I made these decisions was arbitrary but if it was on my list, I pretty much kept it as a NEED, and everything else was just a good idea.
I then added up the cost of the NEEDED items based on my scribbled notes. And I was real bad at math somehow, because it came out to very close to my budgeted amount. And I was very wrong about that (see below). But I thought about it and decided to get all the items in my cart anyway. I did not have the entire Food amount for the pay period in my envelope, right? Because I only took out $300. And I had some overage that I had put into the Savings envelope, I am could use that.
It turned out I did not need to, because my math was off by about $50. Yes, I know, that is sad! I was shocked at how much less it was than I had projected.
So before I left, I sat down on the same bench and looked very closely at my receipt and compared it to my scribbled list to see where I messed up. I even went back into the store with my groceries in the cart (in my bags) to look at the shelf in one case, because the amount was so far off (turns out I do not know how to read grocery shelf labels correctly).
I wrote down on my envelope how much I spent on FOOD and subtracted. I subtract on another piece of paper because there is nowhere to do math on the envelope itself. But I checked that math twice.
And then... I went to the cashier, I watched her ring it up, and I was shocked at how off I was in my adding up. I pulled out the Olde Envelope binder, opened up the right envelope, and gave her cash. I took my change in coins and dropped them in my purse (more on Change later) and the bills went right back in there, with the receipt.
So that was my first foray into envelopes and cash. I kept the receipt and my original list with the prices on it tucked into a fold of my envelope system, just to keep track for the future. I also find that now, I keep receipts for some time, because I more often return items to the store if they are not exactly what I wanted.
Now here is what happened after that:
I had only taken out $300. I knew from my Quickie Budget that I needed $XXX.00 out of that paycheck to pay bills online, and that money needed to stay in my account. I had withdrawn $300 and bought most fo the food I would eat for the week. But I still had some random, lazy money in my checking account.
I want to emphasize that because it is an interim step that FPU does not teach you.
There were 3 types of money from that paycheck:
1) money that needed to stay in the account for known bill paying
2) money I took out for just a few categories, to see how much I needed
3) What Was Left
The What Was Left is very important at this stage.
• I did not know what other spending I might need to do in the next two weeks.
• I did not know if I had enough cash in my categories to cover my expenses.
• I did not have any money in savings, so savings would come out of the What Was Left.
It was basically a financial Demilitarized Zone. A buffer. A No-Man's Land. I did not forsee, could not forsee, what else I might need to spend or buy. I also knew $300 was not enough cash for all the cash categories, and I would be taking more money out (which I did, the next weekend).
My goals were very very miniscule at this point.
I just think, when everything is going to Hell In A Handbasket around you, the tendency is to swing too far the other way, try to control everything, try to be very tight about it all immediately. Then you get sick of it and can't take it, and you snap.
So my very very teeny tiny, itsy bitsy goals were:
• take my lunch to work at least 3 days
• take a soda to work at least 3 days (I drink one a day and it gets expensive)
• eat dinner at home at least 2 days
• eat what I bought
• not spend any other money unless absolutely necessary (like I ran out of shampoo or something)
• write down everything I spent and on what
• observe, take note, and adjust as needed
I succeeded in those goals. At the end of the 2 weeks, I still had money in my envelopes. I still had What Was Left, so I moved it to savings. I was also working a lot to add to savings in every way I could.
I felt immensely successful. And it only took 2 weeks. It did not take me getting out of debt or saving my whole Baby Emergency Fund, or being perfect, or doing it all right the first time. It just took that little bit. I kept my goals small, I met them and I got some traction. Feeling successful? Is very motivating, for the record.
So on my next payday... I did it again. I added 2 more categories, and I added more money to my Car envelope, since I knew I would have to renew my plates in December. Anything I had to spend that was not from an envelope came from What Was Left, and I noted these things so I knew what other categories I might need.
By the end of October, I had a month's worth of data to use in creating my first every written monthly budget.
So you see, I was not flying in the dark. I was not flailing, wondering what I spent my money on and how much and where and why. I was not worried abut what I might forget. I knew. Not perfectly, but close enough. I had envelopes covered in amounts and dates. I knew that if I wanted to buy a soda while at work, the train station kiosk (most convenient) was $2.26, the Walgreens was $2.05, and the Sears Tower (least convenient) was 2 for $2.22 (also cheapest). But bringing a Diet Coke with me, purchased from the grocery store, was a mere 60 cents. I knew how much coffee was, how much take out was for lunch, how often I filled up my car, how much that cost, and how much I spent in tolls and city parking in a month.
In November, I took my first shot at writing and sticking to a written budget for The Whole Month. Quite a challenge. To come.
Photo: My envelopes and my cash. Taken by me. 29 Dec 2011.