Monday, June 29, 2009

This Month's Envelope Budget Experiment

As you might remember, as part of my budgeting goals for June, I decided to try the envelope system for my groceries budget and my home improvement budget. Since we are just one day away from the end of the month, I thought I would report on how I did. The answer?

It was a total and complete success!!!

I have to admit, I wasn't too sure that it would work for me, but as I was going over every single month in these areas, I knew that what I was doing currently wasn't working. So, why not try something new?

I have to confess, I didn't actually use envelopes. I have a rather largish wallet that holds all my credit cards, driver's license and so on. It has two extra pockets, one in the back and one in the front, that I've never used. I decided they would be perfect for my experiment. So, I went to the bank, withdrew $125 for my grocery budget and $100 for my home improvement budget and then put the grocery money in the front and the home improvement money in the back. (I didn't worry about change. Change went in with the rest of my money and was used as necessary.) As I bought groceries or items for the house, I withdrew money from the appropriate pocket. It was as simple as that!

Here it is the end of the month, and much to my surprise I have money left in both pockets...

In the center of that wallet is a section where I keep all my every day money, usually just $20 or so. I admit, I thought that having that much money, nearly $250, was going to be a problem. In the past I have found that carrying cash caused a constant temptation to fritter it away. However, what I found was that having the money dedicated to something totally forestalled the issue. I never once felt the urge to take money out for anything but what it was intended for. Hmmm... could it be that I am a very different person that I was years ago when I had problems with cash??

Grocery Money - $18 remaining

Eighteen dollars doesn't seem like much to me, that is until I consider how many months I have gone well over my $125 goal! I knew I could live on $125 a month, but so often it was easy to just pick up a few extra things, take advantage of a sale, get myself a little treat, and so on. As I love to cook, grocery shopping can be one of the worst places for my impulse shopping. Having a fixed amount to spend really helped, although I didn't change my habits all that much. As usual, I made menus and grocery lists off those menus. I used coupons whenever I could and looked for the best bargain on the shelf. I set a budget before I even entered the store and took along a calculator to make sure that I stuck with it. These are things I have done before, but they haven't always been enough. The problem came in later when I would buy a few things on my way home work one night or maybe for a special event - and then forget to put them in my budget. It wasn't until I crunched the numbers near the end of the month that I would find I had already gone over!

One change I did make was to only buy groceries while grocery shopping. I know that seems a bit silly at first, but think about it - now that there are huge megamart shopping centers, how often do we buy things that aren't grocery related at the grocery store? It is so easy to pick up notebooks in the school supply section or candles in the housewares, maybe a watch battery or a new DVD, and throw them all in the grocery cart. I don't do a lot of this, but occasionally I do get sucked in by other things I "need." Trying to sort these nonfood items out of my envelope system was going to be a big hassle so I vowed not to do it.

The other thing I decided was that if I got to the register and I didn't have enough in my grocery budget... I would have to put something back, rather than use other money in my wallet. That would be rather embarrassing and so, it was the perfect threat to keep me on the straight and narrow. No last minute grabs on the way to the counter, no unplanned stops - I was always sure to leave myself breathing room in my purchases so I wasn't down to my last dollar. The result was an extra $18!

I've decided to continue the envelope system for my grocery budget for the rest of the year. It worked too well for me not to!

Home Improvement Money - $27 remaining

My Home Improvement budget is for all those little around-the-house expenses. Prior to this I had it set at $50, but knowing it was June and I am trying to complete some summer projects, I raised it to $100. Remember too that this covers anything I buy for maintenance of my house, my cabin or as a landlord, so when you break it down that way, it isn't all that much.

I've decided to keep both the $100 budget and the envelope system for this. Again, it just worked too darn well. The money that I have left at the end of the month will go towards my monthly nine hundred dollar goal. This will give me enough funds that I can keep properties in good condition, while at the same time helping me reach my goals.

Photo by: illustratorsam


getting stuff done said...

hmm I may have to give this a go. certainly my only buy things for the day ahead doesn't work. am so so so over my budget and have lost control this month

LT said...

I'm glad the envelope system has worked for you. I currently have about $300 a month to spend on food and personal items. I would like to cut that in half and add the other $150 to my cc bills. I think this is the perfect way to do that. I hope I can stick to it and make it work.

Sharon said...

This sounds like a complete success to me! I'm impressed for sure!

Frugalchick said...

Yay! I'm glad this system was a success for you.

Dawn said...

Getting Stuff Done - I was shocked how well it worked. You just have to be steadfast on not taking that money out for anything else.

LT - Give it a try! It worked a lot better for me than anything else I tried. Also, make sure you are looking for coupons - they can help you cut those costs too.

Sharon - Thanks! I am really happy with it,

Frugalchick - Me too!!

Catie said...

OK, I am convinced. What the heck, it's going to be a lean summer, it's a good time to give it a try!!!

I am wondering if you should put your extra home improvement $$$ into a growing fund (like your Christmas fund)instead of shuttling it over to your general income? That way your more expensive months would have more flexibility.... just a thought.

Dawn said...

Catie - I thought about doing that. I was going to put grocery money in a separate "Party" fund for when I go to gatherings or throw them, but... I got to get that house painted, dang it. Once that is done, I will definitely do something like that.

FabMoneyLife said...

I love this idea! I've always meant to try it, and you've inspired me to do so.

Dawn said...

FabMoney - I would love to hear how it goes for you!!

Dr. Faith said...

Wow! $125 for the entire month! I'm impressed! I couldn't even imagine how I would do that. That is like $1.50/meal. Insane!

How do you keep your grocery costs so low?

Dawn said...

Dr. Faith - some of it is through coupons and finding items on sale, but I don't really believe in stocking up too much. I'm a single gal, I don't need a huge pantry of stuff. Mostly it comes from buying foods as whole and unprocessed as possible. That and a little planning, and it usually goes quite well.