By Kelly Hodges
Anyone who has looked into different methods for creating a home budget has probably run across the “envelope” system. This is an old school but effective way to stay in control of where your money is going that is also very concrete. There is nothing complicated about the envelope system; you simply get a bunch of envelopes, label them with your various expenses (rent, food, gas, insurance, etc.), and decide how much you want to allocate to each for the month. When the money in the envelope runs out, you don’t spend any more in that category until the next month’s paycheck replenishes it.
For example, you might have one envelope for food that you decide you want to allocate $400 into. Whenever you buy food you take money out of that envelope to buy it. This lets you know how much money you have left to get you through the month, so that if it’s the 20th and you have $50 left in your envelope you probably shouldn’t go out for a steak dinner.
Budgeters who use this method swear by it, and there have been entire books written about the envelope system. It’s great in theory, you are in control of your money and decide how much you want to spend in each category before you spend it (which is always a good thing). However, in today’s world of credit cards, debit cards, online bill pay, and internet shopping, a cash only system is obsolete. Not to mention that people don’t really want to have that much cash lying around their homes.
Enter Mvelopes.com. Mvelopes is a financial aggregating website with an emphasis on budgeting using the envelope system. It is similar to other sites like Mint in that it syncs with bank and credit card accounts to track transactions and balances. On the site you set up virtual envelopes and allocate an amount to each envelope. Then as the transactions are recorded you assign them to the appropriate envelope, and the site updates the balance so you know how much you have left. For example if you have $400 allocated to you food envelope and put a grocery store transaction for $100 into that envelope it will show you that you have $300 left for the month.
This site is a great tool for those looking to get on track with budgeting. It takes all the advantages of the cash envelope system and adapts it to today’s non-cash society. The user is forced to plan ahead about how much to allocate to each spending category and then can visually track how much is left to spend as the month progresses. Mvelopes also has a mobile app, so balances can be tracked while on the move to influence spending patterns.
The free version of this site supports syncing with up to 4 financial accounts and up to 25 envelopes. This will probably be okay for some users, but many people have more than 4 checking, credit, or debit accounts to keep track of, and also more than 25 areas they spend money on. A premium version is also available that allows for unlimited financial accounts and envelopes, but will cost around $10 a month. I’d suggest checking out if this type of budgeting system works well for you with the free version first, and then decide if it’s worth upgrading after that.
Maintaining a disciplined budget that ensures you’re saving and spending within your means is a critical part of your financial health, and if envelope budgeting helps you do this then Mvelopes is a tool worth checking out.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of her employer or any other person or entity.