My poor dog Sammy leaped over a snow bank the other night on her walk and did something to her paw; she started limping Tuesday night and by Wednesday was crying in pain. Wednesday is our vet’s day off, so we took her to an animal hospital about a half hour away.
The docs there shaved her hairy paw and didn’t find anything; they suspected it might be sprained. They gave her a morphine shot and told us to let her rest and call our vet in the morning. We were on our way 15 minutes later with a bottle of pain reliever to crunch up in her food. Bill: $259.
Ouch. On the bright side, this is one of those occasions that allows me to demonstrate my deep love for both my dog and my budgeting software! I rely on a subscription program called Mvelopes. (Full disclosure: I used to write a paid column for the site on successful budgeters. M & H readers can get a 10 percent discount on Mvelopes by clicking here.)
The beauty of the Mvelopes is that I plan out my spending for the month based on the old-fashioned envelopes system used by my grandparents’ generation. They would get their paychecks and put a specific amount of cash into physical envelopes (food, rent, utilities, clothing) and when the cash was gone, they stopped spending.
Mvelopes imitates this principle but with virtual envelopes linked electronically to your credit and debit cards, checking and savings accounts. I budget $500 a month in my grocery envelope; when I swipe my debit for $50 at the food store, the purchase shows up in a “new transactions” folder. I click and drag it into the groceries envelope, which goes down by $50, so I know I have $450 left to spend on groceries for the rest of the month.
So here’s the thing – I only budgeted $40 for the dog this month. That means I’m $219 in the red on my dog envelope. The beauty of Mvelopes is I can transfer money out of a range of discretionary envelopes, such as entertainment, clothing and eating out – to cover the unexpected expense. So we skip a trip to the mall or the movies, cook at home a little more this month, no big deal.
The bottom line: The money has to come from somewhere. When you match your monthly income to specific spending objectives in a disciplined way, you don’t have to turn to a credit card to cover the unexpected. Mvelopes lets me start with my paycheck in hand and allocate it to cover expenses in the month ahead — instead of spending for 30 days, adding it up, and looking backward at what I did. (And saying, “Uh oh, my next paycheck doesn’t cover what I spent last month.”)
Shifting money around to different parts of your budget as you move through the month is really hard to do with pencil and paper, or an Excel spreadsheet. Mvelopes, how I love thee, let me count the ways…
Forgive me while I wax poetic on another Mvelopes feature: The joy of saving for a quarterly or annual expense month by month, rather than getting socked in the financial jaw when the bill arrives. Let’s say I spend $1,200 a year for auto insurance. The insurance company will let me pay $100 a month or $300 quarterly – for a fat fee. I hate paying fees. It’s no way to get rich. So instead, I set $100 aside each month in the auto insurance envelope, and when the bill arrives, I have the full $1,200 to pay it off.
The software guides my decision-making. Instead of mindlessly looking at the balance in my checking and thinking, “Gee, I have enough dough to go to that new place in town with the girls for dinner tonight! Better buy new shoes so I look super fancy!” — I realize that the money in my checking and savings is not really cash. It’s a resource, and parts of it are already spoken for to pay future bills. That’s not to say I never go out or buy new shoes — I do plenty of both. It’s just that I budget for it in advance. I always know exactly where I stand with my money, and can make adjustments that reflect the way my financial life really is: goal-oriented, complicated, occasionally surprising — but because of Mvelopes, never messy.
And Sammy is doing much better.
How do you track your spending? Do you have a budgeting tool you love? Comment here or email me at laura at laurarowley dot com.