Envelope Budgeting…No Really.

Envelop budgeting.  It is a concept that I learned years ago when I first got married and was trying to set up a budget.  The concept is fairly simple: You take your paycheck, divide it into different “envelopes” for your different expenses, and then pay for those expenses (groceries, gas, mortgage, eating out) out of those envelopes.  When the money is gone from that envelope, then you are done with that category…until your next paycheck, when the process starts over.

The theory is simple.  In practice, managing the envelopes, turning your paycheck into cash, dividing it up and keeping track of all the expenses can be a bit cumbersome.  This is a perfect job for a budgeting/finances software program.

I started trying to envelope budget on Quicken back when it still came as a DOS program on floppy disks.  It didn’t lend itself to envelope budgeting and I had to “hack” it to get it to work using “credit card accounts” for each of my envelopes.  Not an easy solution, but it worked.

Over the years, I’ve used a number of other programs that were either made for “envelope budgeting” or I willed it to do so by using it in a way it was never intended.  One program for which I had some hope was Larry Burket’s “Money Matters” program that was developed in the late 90s.  It was actually designed to manage your finances using virtual envelopes, and for a while, I finally felt like I was using the program like it was intended.

Unfortunately, the program was buggy and it was difficult to manually enter your financial data.  I later got a sample of “Microsoft Money”, and saw how easy it was to import data and do manual data entry and abandoned the envelope budgeting software altogether.

I fought Money for years, trying each new version that came out, hoping that they would somehow incorporate the “envelope budging” concept into it.  I loved how easy it was to use from a data entry standpoint, but always felt like I really didn’t know where all my money was. I just gave up.

In early 2008, I was leading a small group that was to help teach how to budget and get your finances under control, and I found myself again looking for a “envelope budgeting” program.

logo[1] I ran across a web site, “You Need a Budget.” It sounded corny, but promising.  I had seen them in previously when doing a Google search for “envelope budgeting”, but they had previously only had a spreadsheet budgeting tool.  Now they had “YNAB Pro”, a windows program that followed 4 rules for budgeting.  It wasn’t exactly “envelope budgeting”, but as I played around with the software, I liked it better than any other program I had used in a long time.  The “rules” were compatible with “envelopes” and after using for a few months, I felt like I had control of where all our money was going again.

YNAB is now coming out with a new version that looks even better, easier to use, and runs under Adobe’s AIR framework, so that it can run on platforms other than Windows (i.e. MAC and Linux).

I have found this to be the best tool on the market to track your bank accounts and keep track of your budget.

[Sorry if this sounds like an advertisement.  It is, kind of.  But more of an endorsement of a great product.]

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