Does anyone use "budgetting" envelopes like I've seen on TikTok?

[BernadetteRostankowskiWolowitz]

So every now and then the algorithm throws up a video where they have a set amount of cash they divvi out between categories, and they sit each month and decide where they will allocate their money.

I know it can be done by way of digital "pots" on something like Monzo, but this is cash, in envelopes.

I do like the idea, but as we move into a cashless society, I wonder how effective it actually is.

I'd love to hear if anyone does this in person and how they find it.

@Chichimcgee

I honestly don’t know how it works?

Gets paid into bank.
Withdraws money to put into envelopes.
Puts money into bank.
Direct debits go out.

Am I missing something or is it pointless?

I suppose you could withdraw your salary minus the amount needed for direct debits, then divvy that remaining amount up and be strict about not spending from your bank account.

It's too faffy for me to do it with actual cash, but there is something incredibly helpful about tangibly moving money around. When you're doing this in theory it can get a bit wooly.

e.g. you have £800 left after bills

Think OK £125 per week food shopping, that's £500
Then £70 petrol
£30 school bits for kids
£50 put aside for a couple of takeaways
£150 for other spends/emergencies and if not needed, goes into holiday fund.

And then life happens. The school shopping costs £50, you spend £140 on food on a couple of those weeks, although one week you're just under £100 on your main supermarket shop although neglect to count the £20 run to the corner shop. Petrol only costs £65 so you think you're up. The takeaways actually come to more like £80. You fritter a total of £10-20 on chocolate, drinks, coffee, little snacks/£1 toys. (etc).

That's over half your spare/emergency fund for the month gone and you might not even realise. You think you've got £150 spare and actually you've only got about £70. You can get to the end of the month and wonder where the money even went. If you're really unlucky you'll have an emergency cost at the end of the month for £100, think oh it's OK because I had that money spare, but then find you're £30 in the red.

So portioning it out really helps (whether digital or physical) because if you take £140 out of the supermarket envelope, you will have £15 less the next week and you'll need to physically take it from somewhere else or spend less at the supermarket. When you spend £5 less on the petrol, you can either stick it into an envelope that's feeling a bit light or you can bung it in the "treats" one, then when you want a chocolate bar or whatever, you know whether you can actually afford one. You can't "mentally spend" the money twice.

Yeah I think the idea is you take out all your flexible sounds from the bank, and leave in the account the amount to cover the fixed direct debits.

@Chichimcgee

I honestly don’t know how it works?

Gets paid into bank.
Withdraws money to put into envelopes.
Puts money into bank.
Direct debits go out.

Am I missing something or is it pointless?

It sounds like people have picked up on something so old school that it's obsolete and they've never known it before so they're enjoying the novelty factor.

You could achieve the same thing automatically with bank account pots or standing orders to a spending account or two but that wouldn't allow you to make a tiktok video about jumping onto the latest 'revolutionary' bandwagon.

I've seen these videos too! I hate the idea, but I hate cash. Don't think I'd do it.

I don't use Monzo either though, just a pen and paper and sometimes a spreadsheet on Excel

We used to do this years ago when my eldest was a baby and we didn't have much money. It worked really well, bills would still be direct debit but we would have a food shop envelope, one for baby things, another for 'fun' such as takeaways or days out etc. There were some others too i don't remember them now.

We don't use cash at all now so it wouldn't really work any more.

I use YNAB too. Brilliant method. It also does now link to UK current accounts if you want it to.

I used to do this when DD did various clubs. I always got caught out when fees were due at different times, some termly, some every so many weeks etc so I put money in envelopes each month which spread it out, rather than having to find it in one go and then I always had it ready when it was due.

I used actual envelopes and cash as the clubs were cash payments.

I wouldn’t do it with cash, but the principle of zero-based budgeting really sorts out your financial priorities and is really effective.
We used YNAB for years and it was brilliant. The only reason we stopped is we got to a position where free time and head space was more of a priority than budgeting. I’ll go back to YNAB in a blink if financial circumstances change.
We are using Hyperjar for tracking some things and it’s been really good so far. The kids have debit cards with separate pots for their pocket money and birthday money and I have a card with jars set aside for particular things I want to keep a budget for, but we don’t do full budget-to-zero, so we don’t allocate every penny into jars.

So if you don't link YNAB to your bank, do you just manually add transactions into it? I downloaded it and can see I can set up pots but not sure where to go from there

I use an online budget app and also a spreadsheet!

So on day 1 most of my dd go out and I also tfr 'x' to my savings. That amount Is parsley proper savings but also contains annualised expenditure such as insurances, birthdays et etc. i also have a budget for clothes / shoes so I transfer to a pot and then transfer baxk as I buy stuff. I sometimes go over my 'pot' but then I know I have to claw it baxk innnezt month.

That's managed via the spreadsheet (the app just shows the monthly amount I transferred) and then on the app I also have food / entertainment pots etc. so the money is in my bank account but I know what's free to spend in each category. I like it this way as I can pull my credit card bill in for the month I spend it not when I get the bill.

I sort of do but it's all in my head, I know my budget, I know my core expenditures and I know my discretionary spending. Never been overdrawn. I don't earn very much so it's fairly simple to track

I have done this in the past. Just leave enough in the bank for direct debits and take everything else out and divide it up. Now, I have several different accounts with the same bank and I move money around.

Yes, I used YNAB with manual entry for 2 years before they added the bank syncing.

The good part about it is that periodically you can go in to your accounts page and make sure everything matches up with your bank account. This keeps the whole thing on track and makes sure that it stays correct. I tied myself up in knots when I tried to do it previously on spreadsheets, one unnoticed mistake would mess everything up (and I made several mistakes).

So when you make a transaction IRL you can go into YNAB on the app or computer (it does work best on a desktop/laptop computer) and add it in, then once a week/every couple of days/once a month you go into the accounts screen and your online banking and make sure everything matches up.

If you have your bank account linked it just means that matching up happens automatically and you only have to go in and confirm rather than checking it. You can still enter transactions manually so that they update your "pot" total before they hit your bank. If I'm feeling lazy or forget the exact amount I just wait for it to come through from the bank.

Pre-covid I did for things like clothes, gifts etc. Now I just spend on my cc and transfer money from my Monzo pots regularly (usually weekly as I might only spend twice a week- Tesco and corner shop mostly- but if I've gone proper shopping to lots of stores on same day I do it right away)

I also find the videos (Inc Rainbow budgets!) quite interesting and it's fab how a community builds around them giving tips and support. But imagine quite a few are just about making money via YouTube and selling their own products. You could be making up your budget entirely and noone would know. Pretty skeptical, me! Though I can see the value for people who have no role models for budgeting etc seeing how people prioritize.

I can't see how actual cash stuffing is practical without going to the bank a ridiculous amount.

Jordan page on YouTubes cash envelope is actually just writing the amounts on one envelope, which is split into categories, and paying with a card and keeping receipt inside the envelope. Seems like a great idea but on an ongoing basis won't earn as much money on YouTube as regular videos!

I have 2 current accounts. Wages/rent/child benefit goes into one. Leave X amount to cover DDs then what ever is left I transfer to the other account and that’s the spending on food, petrol etc.

Plus i have those big saving tins i put money aside for Christmas and my tax bill. I wont go into them, if it was in the bank, I would!

Just get a Monzo account. I have salary and direct debits going in/out of a Barclays account. Then just after pay day £800 goes to a Barclays savings account to cover our yearly one offs (insurance, car services etc..I just transfer back when they come up). Then £1500 to Monzo. In Monzo I have 5 weekly pots plus a train pot. This is for everything day to day spending. Beginning of each week I transfer the pot money into the "main" area so it is accessible. I could split further if I wanted.

We do it for savings. We have various joint savings accounts: house, holidays, car, pets etc and transfer money in each month. It's nice to see each pot grow and the money is there when needed. I used to get a car allowance at work and put that in every month which meant money was there for MOT and any repairs.

Regular spends and direct debits just come out of the main joint account.

@BernadetteRostankowskiWolowitz if you're going down the YNAB route I'd very much recommend you watch the videos on getting started and book into some of the tutorials. It's a bit of a learning curve but ultimately it's revolutionised my finances since I started doing it 7 years ago.

Question for the people who use Monzo etc. What is the mechanism for the money to come out of the right pot?

Eg if I'm in the supermarket buying groceries, what has to happen for the money to come out of the grocery pot and not the general or holidays pot?

@BarbaraofSeville

Question for the people who use Monzo etc. What is the mechanism for the money to come out of the right pot?

Eg if I'm in the supermarket buying groceries, what has to happen for the money to come out of the grocery pot and not the general or holidays pot?

I don't know. I do know someone who accidentally transferred their whole monthly wage somewhere else, rather than monzo by mistake. Be so careful

@coodawoodashooda everyone should be careful any time they make any transfer though

I do this intermittently when I need to focus on extra spending like coffees , gifts, petrol, groceries etc
All bills are dd, but I find it really useful for curbing unnecessary stuff

I personally found YNAB too faffy to use, particularly as I share accounts but Revolut accounts allows you to set up vaults or pots ,so you can transfer money in and out of your card from each budget vault as needed. You can share vaults with another account so if you are sharing grocery shopping for example with a partner it’s easier for them to access the available budget .Very easy to use . Also has a function called pockets which sets aside money for any regular payments coming out of your card so it’s ring fenced for that expenditure and not part of your available balance. The budget mom has very good tutorials on using this sort of zero based budget and discusses how you can use virtual pots instead of cash pots, now that more spending is cashless.

@BernadetteRostankowskiWolowitz

So if you don't link YNAB to your bank, do you just manually add transactions into it? I downloaded it and can see I can set up pots but not sure where to go from there

Watch the Nick True video I linked earlier.

Watch all the instructional stuff on YNAB too.

Then there’s a thread somewhere specifically for YNAB on MN where you can ask all us enthusiasts! I’ll find it.