FPU : now with sinking funds.

This next month (Feb) I am trying something new (to me). I am setting up some sinking funds.

Sinking funds were talked about in the first FPU lesson, but I didn't really pay attention. It didn't seem to apply to me. It seems I was wrong.

A sinking fund is where you set aside money every week/month/year for large upcoming expenses. Example: You are getitng married in 8 months, the reception budget is $4000, so you need to put aside $500 a month for the 8 months. Otherwise, you'll have to dig up $4000 at the deadline, and you know it's coming.

Dave mentions sinking funds for things like: putting a new roof on, replacing your car, buying furniture. I am not planning on doing any of those things, and I was overwhelmed with the other 2 types of money he talks about at the beginning of FPU: cash for envelopes and emergency fund savings.

Well I do have things that I need to put money aside for. that I have already moved to putting aside for monthly, and it has been a giant stress relief. Things like:

• getting my hair cut and colored (quarterly)
• renewing my license plates (every Dec)
• buying my city sticker (every July)
• Christmas gift fund

...and some others. Other examples might include car insurance (I pay mine monthly), home insurance, taxes, tuition bills.

But mine needs are more modest. I started out just trying to calculate how much money I needed to save monthly for these various items and adding that to the amount for the general category. For example, I have a "Car" category which is really an "All Transportation" category. It includes gas, tolls, parking, taxis, el fares, car repairs, plates, city stickers, etc.

I can't really do the practice where you just put the money you need for the month into the envelope and spend until the envelope is empty. My envelope might have an additional $100 or more in it I am keeping aside for an upcoming Car expense, right? This is where I was messing up.

Last week, I was listening to the Dave Ramsey Show (not sure of the date) and someone called in with a question along those lines. He was getting messed up because he was putting money in his envelopes that he could not spend monthly. And you are supposed to be on a zero-based budget, so then how does he remember what money has to stay in the envelopes, and what money he can spend?

Dave quickly said, You're doing it wrong. That money goes into a sinking fund. My ears perked up. Then he said, I'm going to send you a copy of my book... and went to commercial.

Drats!

A Google search discovered many blogs written by people who use ING Direct as their sinking fund bank of choice. At ING you open up one main savings account that is linked to a checking account -- theirs or at another bank. From that main account you can set up as many as 25 sub accounts and call them anything you wish. Then you can disperse savings from your main savings into the sub-accounts.

So I opened an account with them right away. I am still waiting for my own checking account to be validated so i can transfer some money into ING and set up my sinking accounts.

Here are some accounts I am setting up:

• Hair and Makeup (to separate from general personal expenses like toothpaste and soap)
• Car Plates
• City Sticker
• Car Repairs
• Trip to see Dave Ramsey Live
• Christmas Fund
• Clothes

I'm going to see how this works for me, keeping in mind that I try things, I tweak them to fit me, and sometimes I stop doing them. There are some poluses and minuses I can see right now:

Plus:
I can rely on the amount that is in the envelopes to be what I can actually spend.
I don't have to carry around a lot of excess cash.
I don't have to keep a running total in my head of what I can spend and what needs to be put aside.
I can see how well I am doing with building up that cash for when I need it.
When the time comes to pay for something that would take quite a hit out of my monthly budget (like my dentists appointments these past couple of months), I will have the money and can stay on-budget.

Minus:
ING is an online bank. They do have an ING Cafe in my city, and in the downtown area (I work downtown) but it is still a few miles from me.
It takes them a couple of days to transfer the money back into my checking account.
Then what? I have to withdraw it? From an ATM?.
This has many more steps than just having the cash on hand.
I LIKE having a lot of cash on hand. It's addicting.
There was always the chance to fudge just a little bit if I wanted to, because I always had money on me.

Right now I am anxious to get started, and I can't. Payday was Thursday, and that is my first paycheck for February's expenses. I have added several new categories to my monthly budget and highlighted them orange, to indicate sinking funds. This has pushed my printed budget to 2 pages. I am still waiting for ING to validate my checking account so I can transfer the money out.

Hopeful that the sinking funds help me tighten up my cash flow even more.

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Photo 1: Gloss Ceramic Piggy Banks. From: "Sinking Funds." If I Were A Wealthy Girl Weblog. LINK

Photo 2: ING Direct. From: "ING announced 1.33 billions USD profit for the first quarter." Financial-Report.Info LINK

FPU : a moment of panic and then back to peace.

Yesterday I had a surreal moment. It was a repeat of a moment I used to have very often. And I responded the way I used to... for a moment. It was like nostalgia, but in a very negative form. Would that be a flashback?

So it's midway into the pay period, but more relevantly, it's in the last bit of the month. Almost all bills have been paid and almost all money has been spent. The envelopes are getting a bit thin.

Friday night I sat down to re-look at my envelopes. I've had numerous unplanned expenditures, and no, none of them were really needed or required. Well, maybe the black cardigan can skootch into "need" area, but the $38 I spent at the Bath and Body Works sale cannot. I was feeling out of sorts. I have enough to pay everything - it's the saving that suffers.

In looking at the envelopes, where as I mentioned I write down all transactions (including money deposits from the bank), I realized some were thin or empty because I had not added the budgeted money as I had decided on my 2nd paycheck of the month. So I was short here and there, just on the cash on hand. The money was still in the bank.

I looked at every envelope and wrote a list of amounts that were short, added in one bill I had yet to pay, and basically realized I needed $150 in cash to get everything back to where it should be.

I then went to my bank account online and checked my balance. I looked at my transactions there at the same time as I looked at my budget spreadsheet. I was then able to see that I also had 3 auto withdrawls still up coming for bills that had not gone through.

So I added those to the $150 and came up with a total. Subtracted from my remaining bank balance. The end number was $67.00.

In case it's not clear-- the $67 was What Was Left. Meaning it was supposed to go in some category and I didn't put it there. So if it was still there at next payday I would move it into savings.

Anyway.

I had that $67 cushion bopping around in my head Saturday morning. I had been meaning to buy my cousin Dana a little present for her last semester in college. I drove to the art supply store and spent a happy 45 minutes shopping. I did have an envelope for Gifts with money in it, but for some reason (because of lazy money, that psyches me out!) I decided to *swipe*, and thus pay out of the checking account. My next stop after the store was a block or so to the bank to withdraw that $150 anyway. I didn't spend $60 or anything like it. I spent maybe $20.

Left the store, drove to the bank. Keeping in mind, the night before I did all this math and I knew what should be in there. I also knew, from my budget, the dates of the auto withdrawals to come.

So I went to the bank, withdrew my money, got a receipt. Looked at the receipt... almost had a heart attack.

You know what I saw, right? My account was down several hundred from the day before. It was down to like $40. And I had just spent $20.

So that is the moment where I had this PTSD flashback to My Previous Life. Where I would call my bank, or look online, get my balance, think I had remembered everything outstanding, relaxed a bit, went shopping, looked at my account balance après-shopping and realized I did not have enough money to pay the rest of my bills. Or buy groceries. Or gas. Cue: hyperventilation.

I'm just reflecting on that moment. That jolt. The adrenaline. The living-on-the-edge. The knee jerk ohmygodohmygodstupidstupidstupid thoughts.

I mean, that was my usual way of living. Do you know what I mean? Maybe it's just me. But I think not.

Instead of driving off and crying, with my thoughts racing, wondering how to get out of this latest pickle, and cursing myself for my bad math skills, my bad bill-memory, my pesky desire to actually buy things, blah blah blah... I just calmed down.

I moved, almost instantly, into mere curiousity. "hm, I wonder what happened here?" I tried going to my bank on my mobile app but my phone was dying. And the branch was closed for the weekend. Oh, well.

A couple hours later I got online and went to my bank account. I looked at my transactions, and what I had suspected did happen. The largest auto withdrawal, which usually would have gone through Monday, had gone through Saturday morning. And so had another one. Now most of those types of transactions only happen during business hours, so I was not expecting them on a Saturday morning. Then I went shopping. Then I withdrew a wad of cash. Then, I am at the end of the month and any "extra" money has already been moved to savings.

It didn't matter. I had money in my account. It was just weird to see the balance such a low number when the night before it was much higher.

I guess you would have to know me to get it. You would have to know how many times I have been royally screwed over by forgetting that a bill was going to be withdrawn automatically, and then I didn't have enough money, which means my $15 bill was going to have a $30 overdrawn fee on top of it. Or how many times I have done the math wrong in my checkbook. Forgotten a transaction. Added instead of subtracted -- one time, notably, by an entire $100. Then there were the years with TCF, a truly shitty shitty bank, where I would call for my account balance and it turned out that there was a 48 hour lag between transactions going through and being withdrawn and my account balance being adjusted. So I could never, and I mean never, rely upon stupid TCF itself to give me the correct amount in my bank account. All the weeks I have scraped down to the very dregs of my checking account to buy gas or groceries after an unexpected expense. Or because I went to the scrapbook store and spent $25 and I really needed it to stay in the bank for a few more days.

I also wasn't too worried because after all, I do have quite a chunk of cash in my savings account, and a quick online transaction would transfer money over to cover me, if I needed to. I just didn't want to do that.

Today I was at the university and I saw a posting for a townhome to share for $600 a month. Which is very very cheap, especially for this area. I wish I could move in January. Maybe I should go see it anyway. It did say the owner has an adorable dog. Big selling point for me.

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Photo: Janet Leigh in "Psycho." From "Scream Queens." Biography.com. LINK

FPU : needs vs wants. wants vs. needs.

Whenever it comes out that anyone is working on their finances, it's interpreted as "struggling."

Whenever it comes out that anyone is caring about their spending, and saying "no" to some things... you get judged. Judged as "being broke" and not having enough. Well, technically, if you had enough to buy any little thing the minute you wanted it you would not be a middle class American - you'd be filthy, stinking rich.

Anyway, when you go through FPU, you get judged. (You must be bad/irresponsible with money or you wouldn't be in this mess.) When you confess you are living on a budget a certain population segment will pity you (Poor thing, she has to watch every penny.)

But what really really bugs me is when people judge spending.

Confession: I do it to other people.

So I am a hypocrite. When you have told me that you have to declare bankruptcy because you have been out of work for 2 years, and that you are on the verge of foreclosure... and then you buy both a big screen TV and an iPad in the same week (true story)? I judge.

But going through FPU, I get judged on little expenses. Little spendings. Every time I buy a Coke to drink, I get judged, because really I "should be" drinking water, and by water, I mean free tap water. Or nothing. I should not spend any money on my hair, my clothes, my cell phone plan, etc etc etc ad infinitum.

I'm a person who has been told - by both loved ones and strangers, by credit counselors and bank loan officers - that I am extremely responsible with my money. And yet, I know there are areas where I could have done better.

I still remember in one FPU class where I mentioned having taken a cab that day. Yes sometimes I take a cab. I have spinal issues. I can't walk more than a block. If I have an appointment downtown, last summer I could have (and did) walk. But now I take a cab. If the journey requires 2 bus rides (a transfer) that is $5.50 there and $5.50 back, for a total of $11.00. Two cab rides with tip are $14.00. The difference is a whole $3.00. And yet, I got judged. And because class is at 6:30 amd I get off the train at 6:00 and still need to drive there, every week I would come in with a McDonalds bag and eat dinner in class. One of my classmates exclaimed, "But you are supposed to be saving money!" Said the woman who cut off her cable, but still had a Netflix account. Who took her family of 4 to New Jersey for Thanksgiving weekend.

So the question is -- what is a WANT vs. a NEED. Some needs are easy. I need to eat food. I need electricity, heat, and a phone. I need a way to get to work. I need clothes to wear for work. I need shelter.

Some wants are easy. I want a big flat screen TV. I want a cable package with a DVR. I want to go to the movies. I want the newest iPhone with unlimited data. I want a new car. I want to go to Bali. Want a DSLR.

But then there is the in-between, and how close is that to a Want or to a Need? I do Need to go to the dentist, and I cannot walk, therefore I Need to transport myself. The difference in cost between Need (4 bus fares) and Want (2 cab rides) is $3.00.

Yesterday I read a thread on a message board, basically judging every person who has or owns a smartphone as being a spendthrift. "HOW can anyone use one of those things, in this economy?!?!"

I have a smartphone. It is an iPhone 3GS. It was $50, purchased 3 months ago when my iPhone 3G broke. My monthly bill is $90. It is a $25 increase from my former T-Mobile bill, which was not a smartphone and thus the $25 a month is data only. I initially bought the phone because I was in library school, and libraries (most people don't seem to believe this but it's true) are not about books, they are about technology. Libraries are about information flow, and information comes to us, most frequently, through technology. I was falling behind my much younger classmates who were coming in to library school from college, who knew the difference between an iPhone and an iPod Touch. I was scrambling to keep up with them. I was printing out call letters for books, walking into the stacks, not finding what i needed, and having to walk back to a physical catalog, while my classmates, soon to be my competition for limited job opportunities, were looking at WorldCat through an app on the phone. I wasted a lot of time, which, working full time and commuting while in grad school? Was really hard on me. So I bought a phone and slowly started bringing myself up to the realm of where my classmates and soon-to-be patrons were.

I currently work as a digital librarian. I got this job just weeks after graduation, a feat unheard of libraryland. I work in a very technology-focused environment.

So was this phone a want? or a need? I get judged all the time, because to other people, it's just a Want, and I am spoiled.

Today I am wearing a new cardigan I bought last weekend for all of $18. I did not have it budgeted. But I have had, in my mind, that I NEED A VERY LONG BLACK CARDIGAN. What would Dave say -- I don't "need" a cardigan.

But women know. Women know that sometimes you have clothing you can't wear unless you have other clothing to wear with it. I have work pants I cannot wear unless I wear heels. I have shirts I cannot wear unless I have a longer layering tank or tee underneath. I can't wear any of my jeans with my boots because they are not cut right.

Since I don't have a lot of clothes (relatively), depending on how laundry day falls, what the weather is like, what shoes I can or cannot wear today, and what color bra is still clean, I find myself scrambling for things to wear with a closet full of clothes. One extra long black cardigan can open up many more work outfit options with what I have. I have been looking for one here and there ever since I realized this. So when I saw one at WalMart, for under $20, and it was cut how I wanted, I didn't even try it on. Just bought it in my size.

But technically... did I "need" it?

Did my FPU classmate "need" Netflix? Well she has 2 little kids so in her mind she "needs" something for them. Does she "need" to drive a big SUV that costs so much to fill up? With multiple kids maybe she does. Did she "need" to take a cross country trip at the holidays? Maybe she wantsneedswantsneeds her kids to have holiday memories with Grandma.

Just some thoughts swirling around today. Shortly, I have to go catch a cab.

PS. Just looked at my budget and I had $60 unallocated (bad girl) - so the sweater will come out of that.

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Photo 1: Wants vs. Needs cartoon. From "My wants and needs, time to get back to basics..." TheLongAcre.net. 12 Oct 2011. LINK

FPU : hold on, a change is coming.

Now that I've switched from *swipe*swipe*swipe* I am dealing with something I never thought about much before....

Loose change.

Actually, I used to keep and use my change all the time. First, I did laundry at a laundromat so I always needed quarters for that. I also used to take the tollway a lot and would pay with change. And I used to buy my daily soda at work from a vending machine. However, I don't do those things any more, so I rarely spend my change unless I make a special effort, and it sometimes piled up.

Here's the thing -- when you swipe a card and the total is $15.17, the $0.17 is taken out of your account and the remaining $0.83 of that dollar stays in your account, and you don't have to think about it much.

When you pay in cash, you give $16 (or $20), and you end up with 83 cents in coins.

When you pay from cash in envelopes... what do you do with the change you get?!?!?

We talked about this in my class, and I've seen various options on the internet. Dave's Envelope Systems come with paper envelopes. After a month, they get a bit ratty just taking bills out and writing on them. Coins would make them wear out faster.

The system also comes with a plastic pouch that could possibly hold coins, and some folks in my class used it that way. I tried it, and did not like it. I did not like the Ziplock-like seal. I did not like that the pouch was designed to lie flat, and coins add bulk. I also didn't like that coins would then be used for various categories, rather than the money staying IN the category. Basically I just didn't like that pouch, or I would have used it more.

I really love the idea of using cute zippered fabric pouches for my envelopes. They are sturdy, pretty, hold coins, machine washable, crushable, are more secure than regular envelopes, and if you get different fabrics for each pouch, it's easy to tell at a glace which category you have in hand.

The down side to this idea, for me, is that I really really like keeping a transaction total on each envelope. On the other hand, doing that has made me a bit lazy. I take money out of any envelope and just make sure to recalculate and re-shuffle my bills later. I don't do the thing where I spend until the envelope is empty, and then stop using that envelope. I just move money around.

But I'm discovering some flaws with that habit, which I might go into another time. At this moment I still find it a valuable practice. It makes me very aware of how often I spend and how much each purchase is. I also end up really looking at my receipts and noticing costs and taxes more. That's important.

But anyway, the point is, I actually had to think about what do do with coins, so here's what I do:

I save my change.

I went through my stuff and found a super cute box with an attached lid that was intended as a recipe card file. I have been using it as a kind of Rolodex since maybe 1994. But hey, all my contacts are electronic these days. I dumped the contents and put the box in pride of place, right next to the door when I walk in and dump my mail. And then I started saving my change and putting it in there.

I decided that I was going to pay for purchases with whole dollars as much as possible, so I could keep my paper envelopes from tearing. When I received change back at the register, I would just drop it in the bottom of my purse like I used to all the time. The difference is.... now every few days I clean it out, and I drop that change into my super cute box with the sunflowers on it.

It's a very cheerful box. It likes change. So do I.

My plan was to deposit the money in the bank periodically. But a funny thing happened once I started to really pay attention to coins.

Dude. You would not believe all the change I had all over. It was like I was afraid I might need a pile of pennies sometime and I just wanted to have stashes everywhere in case I had to leave the country unexpectedly. Here are some of the places I found random change:

• in a change purse, in my purse
• in a zippered pouch, in my purse
• bottom of my purse
• bottom of maybe 3 other pockets in my purse
• bottom of the tote bag I take to work
• bottom of various pockets in the tote bag
• outer jacket pockets
• little cute dishes sitting around that also held paper clips and thumb tacks
• on the shelves of my bookcase
• on the floor of my bedroom
• on my dresser
• in the cup holder in my car
• in the center console of my car
• on the floor of my car
• between the seats of my car
• in the pencil tray in my desk drawer
• in various baskets on shelves and my dresser
• in my pencil and pen organizer at work
• in my desk drawer at work
• under my monitor riser at work

It just went on and on. It got kind of funny. How many places can I find random coins? I'm not talking a ton of money. Sometimes it was just a penny here or there. Or a quarter and a few pennies. The point is, it seemed to be everywhere, and I didn't really keep track of it. It was everywhere because I didn't have a system for it. Every once in a while when I was cleaning out my purse or bag I'd find change, put it all together, and use it for purchases until it ran out. But then I'd have random coins around, and I'd just leave them wherever I had them.

Once I had my little box set up, it all changed (no pun intended). I started collecting it all up. If I found a quarter on the floor under my bed, in the box it went. When I found random change at work, I dropped it in my purse to be cleared out later. Lucky penny in the street went into my pocket, and eventually into the box. It was just funny, is all. Like, I never really noticed or thought about individual coins much before unless I needed them. But once I had A Place for them, then I noticed them more, because I wanted to put them there. Like the dog metaphor I used before, about how dogs just want to be loved and paid attention to, the little pennies just wanted to be valued. To be noticed.

So it piled up, pretty quickly. After a week I found myself counting the coins. Once it got past $20, the box had a deep layer of coinage in it. I would take $20 in coins out and put it in a Ziplock bag and stick it elsewhere to psyche myself into thinking I really didn't have any money. Now, I figured, if I had "an emergency" it would have to be dire for me to touch that cash. Who wants to pay the pizza guy with a baggie of nickels?

I never really got around to depositing the money. As I've mentioned, my bank is a 45 minute drive away. They've also cut their hours deeply, so it's hard to get to a branch during lobby hours.

I had this brilliant (I thought) idea... that I would use my $20 baggie of change for my BLOW money (miscellaneous and fun spending). I figured, I'd have to really want to spend it if I was willing to drag out a Ziplock of change and pay in quarters (so classy). Good thought, but it did not work. I did hate doing that. Instead of using the change I would just take dollars out of my envelopes and write down the amounts. It didn't work for me. I'm not embarrassed by the process, but it takes longer, requires juggling, and when I am commuting and worried about pickpockets, panhandlers, and other scam artists, I just don't need the additional hassle. (This is a great example of how you have to experiment with things, see that some work and some don't, and adjust according to your life and your needs.)

So the change piled up. Now I do calculate my spending on my envelopes, and no I do not round up or down. This possibly is a mistake. I was taking the change out of circulation, but not accounting for it being gone. Whatever, that's what I've been doing usually. I'm not a math major. It seems ok so far.

In late November I had an emergency that depleted my entire savings. You know what? I was out near my bank at the time. And I knew the day before that I would be. So I brought the change along. (This is when I had the brilliant idea that perhaps a large zippered make up bag I was not using might have been a better place to store change...) I had no idea if the bank would give me a hard time, but hey, it is legal tender, it's my money, and I wanted to deposit it.

So I paid this big bill and I went through a bunch of trauma (not meaning to be mysterious but I don't wanna talk about it here)... and the very minute I could, I drove to the bank and handed over a few bags of change to the teller. My bank has a machine that will count my change for me. I deposited my change and some other money and restarted my Baby Emergency Fund right away. And now, I'm still racking up the change.

I kind of like saving my change. I kind of like counting it. I kind of like having a cute box full of coins. I kind of like this easy painless way of saving money.

But I don't know, because some of these fabric pouches are super cute!!!

Other things I want to talk about in future:
• How much cash do I carry on me (Dude, ALL of it) (Really)
• My first time actually doing a monthly budget
• Struggles I'm having (still)
• My first giveaway. I swear, I am giving something away on this blog, and soon, related to this topic.

I signed up to take FPU again. I need the support. So that class is next week and we will see how it goes.

Oh and by the way.... I AM going to see Dave live this spring. I saw an internet ad the day after payday and THAT TIME I had money still in my account. My ticket was $30 and I took it out of my Entertainment envelope, meaning I did not put any cash into that envelope this month (If I decide to see a movie or buy a magazine, I still have my BLOW money.) So I will be saving for the gas and hotel room over the next several months. See how that works? I know it's coming, I know how long I have until the trip, I will calculate my gas and meal costs, look up hotel costs online, and budget monthly so I don't have to scrimp the month of.

Financial Peace. It's good to have. Thanks for reading.

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Photo 1: Loose change. From "It All Adds Up." Triumph of the Spirit weblog. 23 Mar 2010. LINK

Photo 2: Zippered money pouches. From "Are You Using the Envelope System?" The Simple, Green, Frugal Co-op weblog. 29 June 2009. LINK

Photo 3: Fabric envelopes. From "Dave Ramsey-inspired Fabric Envelope System." The Beautiful Budget weblog. 12 March 2010. LINK

FPU : payday = envelope PAR-TAY.

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.

• Rent
• 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)
• Savings

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.

SUCCESS!!!!

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.

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Photo: My envelopes and my cash. Taken by me. 29 Dec 2011.