From Mvelopes to Envelopes

Saturday, October 8, 2016

I think we may finally have done it.

For about 14 years now, ever since Jairus was about one year old, we have been working at controlling our budget.  It started with the great crash...the weekend that we realized that we had absolutely no money to our name, lots of debt, bills owing, etc, etc, etc... In the words of Miss Nelson..."something must be done".
I've written before about how at that point in our lives, James had been handling the finances, but as our family grew, our organizational system needed to evolve.  We agreed that I would take it on, and to this end, I started reading and researching the best ways to do that.  I started with a Dave Ramsey book, which was probably the best place to start.  I also read some Mary Hunt and we attended a Michel Bell seminar through, I think, Focus on the Family.  We would later step up our Dave Ramsey education by attending a Financial Peace University course and then moderated the course for another couple.  I used resources from Crown Financial (the late Larry Burkett's ministry) and this led us to Mvelopes, an online budgeting system that uses virtual envelopes.
I've now used Mvelopes for over 12 years for the most part, loved it.  It revolutionized our finances and we saw a huge improvement in our budgeting.  Between that and the FPU, we got out of debt completely, (except our mortgage), and completed the baby steps up to number 3 (#1 Baby emergency fund of $1000, #2 Pay off all debt, #3 Full emergency fund of 3-5 months of expenses).

Then we built our house.  That pretty much put us back to #1, with the exception of the debt, which we still stayed far away from (builder loan converting to mortgage not withstanding).  Since building, it's taken us a few years to regain our equilibrium.  The Mvelopes was still working for us...sortof.  Over and over I'd find that we were overspending and putting many envelopes into the negative.  A number of times over the last 4.5 years I'd actually had to just wipe all the envelope balances and start all over again, as we had so many negatives that our account had hit rock bottom, even though some envelopes still showed a positive balance.  It just felt like an endless cycle that I didn't know how to address.
I had a niggly suspicion that using "real" envelopes might help, and in fact, for a number of months had made it my goal to start using them.  I was meeting with a couple friends regularly to keep accountable with finances and ending our sessions with a goal for the next time was a common occurrence. Month after month passed and I didn't follow through.  We had made a few paltry attempts to start using paper envelopes, but we'd quickly realized that planning was essential.  You couldn't show up at the bank and ask for a wad of cash and only THEN try to figure out what denominations you need.  When old timers describe how they'd cash their paycheque, come home, sit at the kitchen table and divide it all into envelopes, they never mention how they got all the money in the right amounts (What, were they paid in one dollar bills?).  Then there's the modern issue of automatic withdrawals.  Close to half of each paycheque we receive actually needs to stay in the account for automatic bill payments like mortgage, or online payments as all of our utilities are.  These two big issues were an admittedly small hurdle that I just never got around to sitting down with my calculator and figuring out.  So it never happened.

About a year and a half ago, I discovered that there is just one Dave Ramsey ELP (endorsed local provider) in Ontario.  His name is Phil Medler and he lives way out near the border on the south west side of the province.  Fortunately he does Skype and phone consultations.  I submitted an email on the DR site and he shortly got in touch with me.  We had a phone consultation and quite honestly, I don't remember how the conversation went.  I knew however, that I wanted to take the next step and have at least a baseline session with him and figure out if he had any solutions to our problem of overspending, and also our imbalanced budget whereby our housing was far more than the recommended percentage.  It would be $175 though and that was a big chunk for us.  I put it into the list of what we hoped to use our tax return on both last year and this year, but it didn't happen either time.
Last summer when we were up to Fair Havens, I was excited to hear that Phil was up camping as well, and was offering a week long finance class after chapel.  We were unfortunately only staying until the Monday of that week, so we attended just the one day.  It was a great session and I was pleased that he was putting his own spin on the DR stuff, as I sortof felt that we knew all the DR principles already.  This year I was even more excited to find that he had returned, and it was during one of our full weeks of camping.  James and/or I attended each day except for day one as we had an important meeting back in Hamilton that we had to come home for.
Sometime midweek, Phil announced to the class that anyone attending would be welcome to schedule a consultation with him at NO cost.  This was the opportunity I'd been waiting for!  We ran up right after the session and quickly made an appointment for the beginning of the next week (SO glad we stayed for three weeks this year!).
The consultation was very helpful and encouraging, but it was actually the last class session the week before that ended up being the most helpful.  It was guessed it...paper envelope budgeting.

I sat through that session and for a good chunk of it, kept thinking in my mind, "Aw we don't need to do this....we have a better way....the online Mvelopes is far superior and up to date with modern budgeting...".  However, deep down, I had a funny feeling that this was actually the answer we'd been looking for.
By the end of that class, James and I looked at each other and agreed....we had to do this.  At the very least we needed to give it a try.

It took a few weeks until we could actually start and I worried during that time that I was just making more excuses.  I'll admit, I was scared to do it.  I was scared it, and I, would fail at it.  I knew how hard it was to stick to the grocery budget and while my early budgeting days saw me pulling over my cart before the check-out line to add up my purchases with a calculator and putting back anything that went over, I'd gotten lax about this, telling myself that we "deserved" that particular item in the cart.
The weekend in between the class and our consultation, it was rainy and dreary.  Perfect day to stay in the trailer and work on the budget.  It was due for an update anyway and I made sure to add to the grocery amount.  Then I figured out how much money we'd be withdrawing with each paycheque.  This is made easy since our budget is pretty streamlined: each paycheque is planned and allocated according to an excel spreadsheet some kind person shared with me on the Crown forums a number of years ago. The final step was to figure out the denominations for each of these withdrawals.  We were set.
As I said though, it took a few weeks because I couldn't make a big withdrawal, even after a paycheque, until our Mvelopes were all cleaned up of negative balances.  I didn't even quite make it to that point; I had to just jump in with one foot and figure out adjustments on the fly one day when a paycheque had come in and I knew if we didn't go for it, we never would.

To make the whole thing more palatable, I stopped at the dollar store and picked up a couple of mini file organizers.  I had had one of these years ago when I thought I would try paper envelope budgeting and ended up just using it to organize receipts, business cards and the like in my purse.  Now I sat at the dining room table with the organizers, a new box of dollar store envelopes, and my withdrawal.  It felt really good to get it all squared away, even if there wasn't much cash in each envelope yet.  Phil recommended keeping a rather small number of envelopes on your person at any one time.  My online Mvelopes has grown over the years...I probably have at least 50 envelopes there on the site, although many don't get used much as we don't have the budget to fill them on a regular basis. Phil said around 5 envelopes would be good, but I knew I couldn't pare it down that much.  I started with nearly double that: gas, groceries, Afton's violin lessons, "extras" (what we call milk and bread money), treats, and a few more.  Over the last month they've expanded to include medicine, car repair (which came in handy when I was out the other week and the Pilot suddenly broke; I had to stop and buy a part and get over to my mechanic--I was very glad I actually had the cash on me or I wouldn't have made it home!), kids commission, diapers/formula, parking, eating out, toiletries and kids miscellaneous.

Phil recommends some pretty strict rules when it comes to the envelopes.  No borrowing from another envelope for a different purpose is probably the hardest.  I would say that we've been about 90% successful with this, and when we've not held to it, it's been for nearly emergency-level reasons, or for a tiny amount (ie: swiping a quarter or loonie to get a desperately needed coffee).  I don't intend to let it go beyond that, and Phil advises that if you find you've run out of something then take note and budget more for it next month.  This sounds good theoretically, but I'm not sure how we'd make it work in all practicality.  Our budget, as advised by both Phil and Dave, is Zero based.  So if I needed to re-allot money to another envelope, then something will get less of course.  There's not much wiggle room in our's not like I can take from the "blow" money because we don't have any...even though this is something both Phil and Dave say you must have.  I get the premise behind this (so you don't go crazy with the tight budget and overspend) but I just can't bring myself to budget money to James and I to spend on whatever we want, when there are so many budget items that so desperately need it.  Ours is pretty much a budget of necessities.

So now, the report.  How is it going?


Even though I was scared at first that we just wouldn't have enough money for stuff we needed, I hung on to the fact that we have lived the last 10 or so years with no credit card, and with few exceptions, have had enough money for all our necessities.  Even if we constantly had negative envelopes, they usually got filled eventually, which means, we DO make enough money to live on, it was just a matter of timing that properly.  And I was right! (At least so far...).  I didn't think I'd have the discipline to stick to the confines of each envelope, but I've been like a nazi about it! (is that offensive?)  I'm hoping this isn't just a "honeymoon" phase and that it'll get harder to stay disciplined.

It's been great with the kids too.  We got back into our commissions practice this summer and every week each of the kids has a "zone" to take care of and they get a dollar a day for that. (I know, not much...but it's what we can afford with 4 kids.  Better than nothing!).  It's been great to actually always have the money on hand to pay them, instead of saying "you have to wait until your dad gets paid".  And now when they ask for stuff, I can either say, "use your commission" or "there's nothing (or something!) in the envelope for that".  I was really excited this year at the Ancaster Fair because every year we buy lunch there as a big treat...but usually we don't really have the money, but I'll take it from the account anyway.  This year we actually had eating out budget--cash!   Afton's violin teacher prefers cash and usually I've had to run to a bank and then get change if only the ATM was open but now it's all done and waiting for me in the envelope each week.  Such a great feeling!

I still like to use both Mvelopes and the paper envelopes though.  The Mvelopes is great for big picture organization, and of course to keep the auto-debits and online payments in check.  We have a lifetime membership to Mvelopes anyways so it's nothing for us to keep using it.

So that's the finance update!  I highly recommend the old fashioned paper envelope system!