Today my wife and I sat down together and tried to come up with a reasonable budget for our family. We've tried to do this in the past, using various systems and apps but it's hard when there are 2 incomes, separate bank accounts, car payments along with kids and dogs to look after. Money flies in all sorts of directions.
This afternoon we looked at all the money that comes in, tried our best to gather all of our expenses, and we SHOULD have money left over each month. But it doesn’t feel like we do. We will soon be using an app/service called Proactive Budget to help rein in our spending (our cards are being shipped to us).
Here’s how it works. We each have a debit card that’s linked to this app. We transfer money to it from our checking accounts and distribute it to digital cash envelopes, essentially. When making a purchase we first tap on the category from which we’d like to take the money (the card can’t be used until that’s done, meaning if you lose it there’s not really any money on it). Then once it’s been purchased the envelope shows the amount remaining.
Got $250 in the Shopping envelope then you bought $175 worth of stuff? The envelope then shows $75, so if your partner then checks the app to see if they can buy stuff for $125 they’ll see that they can’t, unless they move money from somewhere else.
So at any given time we can each see how much money is left in our envelopes and when we spend, the amount gets adjusted. The beauty of a system like this is that we literally see whether the dollars are available to spend on that particular category, instead of looking at our spending AFTERWARDS and realizing we busted through the budget we’d agreed upon. Or checking our account balances and thinking “yeah, I think we’ve got the money”.
One particularly nice feature is the ability to set up distribution “templates”, for how to split the money into the “envelopes”. So let’s say that each time I get paid I want to add $1,000 to the app and distribute it as follows:
Eating Out: $200
I would do it once and then save it for future use. Then all I do is say “run the ‘Nick’s Paycheck’ template” and voila I’ve funded the envelopes.
There’s lots of stuff that won’t go into this app, like bills that we have on auto-pay, car payments, car insurance, rent, etc.
We might also couple with this a loan to pay off all our credit cards, so that we can then make ONE payment, to one place, instead of multiple due dates across various cards. And once those cards are paid down, we just don’t use them. It’s easy to see when $0 balances go up but less easy to keep track of whether a (for example) $5,478 balance went up.
Who knows what the payment was for that card (is it the one we pay $200 on or $150), if it’s been made yet this month and if that means this amount has ONLY dropped, or whether something else was charged to it. Now multiply that by several cards and this is how people get into such huge debt.
We’re really hoping that the digital envelope system will work for us and at the very least show us how much money we’re really spending on certain categories.
I hope to report back in a month or two with good news :)