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.

We bank with monzo and do similar with online pots - it has had a really positive effect on our management of our money.

So, when we get paid money is transferred automatically I to pots that will cover our bills, food shopping, petrol etc. We have a "general savings" pot which gets an amount every month and then I have specific pots for things like a holiday that I pay an amount jnti automatically, and top up manually what I can towards the end of the month. The kids have their own pots that their pocket money goes into every Friday.

I find it really handy to be able to clearly see how much free money we have for the month.

@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?

You have a current account with any spending with the card coming from that. The pots just sit in the background like a dozen savings accounts.

So when we buy train tickets for work, the £34 transaction comes from of the money in the current account using my card. Which for us is our "weekly spend" Because for us train tickets are extra to my normal weekly spent I keep it normally in a separate pot (see pic I posted). So then I can then instantly transfer £34 from the Train Travel pot to the current account/card account. Hopefully makes sense.

It is very easy. In my pic above, you just tap the pot you want to amend the amount and either press Add or Withdraw (and + or - the amount) and it comes out of your current account into the Pot (with Add) or goes from Pot to curent account (using Withdraw). It is instant - so if your dental appointment was more than expected/you know you need to use savings etc - you can instant withdraw from any pot (and sort out savings tranfers etc late).

@BernadetteRostankowskiWolowitz

Those who do the equivalent online, do you sit and transfer funds at regular intervals to put the money where you want it, or do you set up standing orders?

So I can only speak for myself here but basically I have all the money divvied up in the pots on my Starling account for various things.

The only exception is when it comes to food shopping, toiletries, cleaning products, etc. That is a set monthly budget (broken down to weekly budgets but I am flexible on that as long as it tallies up across the month), which I keep track of on a spreadsheet and put it all on my credit card which gets paid in full on pay day. So I treat it as a fixed bill along with rent and other household bills.

When I am shopping I can check what is in the pots and spend accordingly/within means. But I use my credit card for those purchases too. Then afterwards, I transfer the money I spent on the credit card out of the relevant pot/s and put it in another pot for the credit card. This gets paid off in full from the credit card the same time I pay for all the food shopping on the credit card at the end of the month.

I know people have it set up to shop with their Starling card, but I prefer using credit cards for cashback and added protection.

I hope this makes sense!

Thanks for the replies, but I didn't realise how faffy it all was, surprised anyone can be arsed with all that admin.

Will just stick with paying for everything on credit card and just checking once a month there's enough in the current account to pay it back after normal savings have come out. If there isn't then that's a sign we need to cut back a bit.

My mum used to have a tin when we were.little with various slots. I just keep a notebook and keep a record eg monthly outgoings and monthly set aside so eg bal 100 dd outgoing gas 10 elect 10 phone 10. Save car ins 10 save house ins 10 free cash 50.

@Kshhuxnxk

My mum used to have a tin when we were.little with various slots. I just keep a notebook and keep a record eg monthly outgoings and monthly set aside so eg bal 100 dd outgoing gas 10 elect 10 phone 10. Save car ins 10 save house ins 10 free cash 50.

Yes my mum had a metal tin that locked with slots in the top to push money through into separate compartments.

YNAB will do it automatically if you have been to that shop before. So for example if I shopped at H&M and put that transaction in the Children's clothes category, the next time I shop at H&M it automatically comes up as children's clothes. Same for Tesco/Groceries etc.

That works for the vast majority of things. I don't bother breaking down things like cleaning stuff and shampoo etc from the weekly shop. It's all groceries.

The only annoying thing is shops where you might buy different things each time, then you have to manually change the category but it only takes a second. There's no transferring money back and forth, that's all done automatically.

@BarbaraofSeville

Thanks for the replies, but I didn't realise how faffy it all was, surprised anyone can be arsed with all that admin.

Will just stick with paying for everything on credit card and just checking once a month there's enough in the current account to pay it back after normal savings have come out. If there isn't then that's a sign we need to cut back a bit.

I dont find it faffy but I tend to hate the faff of apps and computers. I really enjoy the admin element of it , get cash out once a month, put it in the envelopes. I like the end of the month totalling up what is left and putting in my savings pots

I use Emma, it doesn’t create pots in my bank account but tracks budgeting amounts for each category and sorts them automatically. Really good to see how much I’m spending in different areas.

Literally the only things I use cash for are the window cleaner and those annoying kids rides at the shopping centre so actual cash envelopes would t work for me!

@MaggieMooh

It’s madness. Someone could steal the envelopes and then you’re knackered. Or you could lose them. It’s going back to the olden days when people kept cash in the house instead of safely in the bank.

The bank is not without risk. Google banking crash.

You make an investment decision to give your money to the bank to invest on their behalf.
Repayment of deposits comes last in a bank going bust. The banks are currently charging for the service and will soon be charging small account holders negative interest on top of the bank charges for the use of the money.

OP if you want to do a similar system use a deposit account and a number of fixed transfer for the same day your wages hit your account.

@MaggieMooh

you could also lose your bank card. someone could also steal your backcard and identity.

But your deposits are protected up to £85k and if you lose your card, you can cancel it and use another card and the bank will refund any stolen money as long as you haven't been negligent.

Cash is almost certainly gone forever if you lose it, it's stolen or there is a fire.

well I’m not likely to have £1000s stashed in a piggy bank. I lived in my house 25 years, never been burgled or had a a fire.

Any randam burglar would have to find any envelopes or open all my tins on the off chance one may contain cash and not one of my vast collection tea bags.
Horses for courses, I like having a bit of cash in the house. A few years ago my bank stopped all my cards on Easter Saturday because of suspected fradulent activity. At least I had a bit of cash to tide me over.

I have a spreadsheet and operate it myself - though it's very tempting to go into other categories. From what I gather from this thread, the money goes out of my main account on Monzo - say I have £100 in my main account, spend £10 on clothes so main account is now £90 but I can go on later and assign it to my clothes 'pot' which had £100 and now has £90?

I've gone for the good old spreadsheet system. I'll try a couple of months tracking and see what it's like.

We are luckily now in a position (thanks to a promotion and reduction in childcare costs) that we are more comfortable. But I'd like to keep an eye that it doesn't slip.

I used to do this years ago when we paid everything with cash and it worked well.

I don’t anymore as I can’t remember the last time I used cash!

Instead we know have our main bank account where all our earning go in, then we leave all the bill money in that account.

What’s not bill money we move into another account and this is spending money, but at the start of the month we decide how much we want as savings and move that into the saving account.

Then we know what’s left is our spending money and as we both use the same account we check with each other before making big purchases.

It works for us and don’t get into any debt.

Oh, we also use a spreadsheet that we update every month so we know exactly how much money should be in each bank.

We've made steps to simplify - one salary goes into one joint account with all the direct debits out of that and no other spend, then the other salary goes into the other joint account which is used for day to day spend.

So in theory easy to reconcile (when I remember!), but I like the idea of "pots". I could just do spreadsheet pots manually so will monitor this months spend and then look at how I allocate/use pots. I feel a pivot table coming on

I tried this in the 2000s to distinguish disposable income from various "spoken for" money and it worked OK, but I don't think it would work in 2022 with loads of little envelopes because of direct debits and an increasing move to a cashless society.
The modern solution is a little notebook or text document on your phone with running totals for each "pot" which you reduce as you spend, I think.
That takes self-control to not carry on spending once it gets to zero, but tbh the envelopes also require self control to not just dip into a different one if one runs dry.

I think what you've done @BernadetteRostankowskiWolowitz is the easiest way.

If you separate your money into different accounts, this can be done automatically by standing orders and you can use the pots by only spending from certain accounts - eg carry the card for the groceries and joint spends account and your personal spending account card and then remember (or even write on) red = joint and black = personal. Money for holidays, savings etc just builds up in accounts that aren't touched day to day.

So you get the budgeting control you want without needing to categorise and track individual transactions. It all happens automatically at the higher level.

If you overspend on groceries or personal items, the money in the account runs out/runs low. So you have to do without if you can, or consciously divert money from another pot. Or if you underspend, or want to save up for a bigger purchase, the money builds up in the account and if you don't spend much on personal items for a while, you'll look in your account and see that there's money in there, if you see something more expensive, but aren't sure if you can afford/justify.

I have multiple bank accounts, and have set amounts transferred by standing order to various areas on payday.

All of my personal DDs and standing orders come out of my main account into which my salary is paid, then another amount is transferred to the joint account for bills, food and household stuff.

Savings/ISAs move to the relevant pots, and I have a 'pocket money' account for day-to-day stuff and frivolous spends.

All my cards are linked to my Google Pay app, so I don't even carry cards any more.

The US is a much more cash-driven society than Europe or the UK, so while it looks weirdly old-fashioned to us, it makes sense to many North Americans.

A friend of mine is doing this. She always has done. Cash. She goes shopping in Aldi and pays cash.

She puts petrol in her car with cash from an envelope.

Days out are accounted for with cash in an envelope.

Anything left at the end of the week is put into savings account.

It can be done. It's just whether you want to or not.

Change your bank to Starling. Budgeting pots is so straight forward and you can arrange for your bills to be paid directly out of the pots so it's impossible to accidentally dip into allocated bills money.

I also have a separate bank account for my grocery spending, and a credit card for fuel which I pay off in full each month.

Same principle as money envelopes but all digital and it works perfectly.

Its a very good way of making sure you keep well within your budget and can even save money.
You could have an account where you pay in an amount every month and then your bills are paid for but the remainder of the money sits there until needed. You could draw cash down say every week for food and small items petrol, fares to give yourself a budget to keep within. The dd card is a nightmare and cc even worst if you want to budget tightly. Ive know people to use them either a card and keep a notebook on spending or on their phone by an app. The more we use cash the better it is for us as we can see the money actually been given for items and it does make you think 'do I really want/need this'. Ive just started to draw down cash every week to pay for food/small items as I was going over my budget and the cc or dd card did not seem to be working for me and I want a money left at the end of the month, to transfer into a holiday pot and Ive also taken my friends advice and doing a spreadsheet of my outgoings everymonth. Put a jumper, socks and slippers on to save on the heating as I have friends who wander around in shorts and s/s teeshirts. When you start to transfer what is left at the end of the month into a separate 'holiday' account you start to feel good and then you somehow work harder to find more money to put into the pot. My daughter has a spreadsheet so she can keep an eye on her budget and said its the only way to have different pots. She has just started to draw down an amount every week to keep a tighter reign. So it does work! Go onto www.moneysavingexpert.com Good luck.

I put savings into my savings account on payday,
Then I just check my current account every few weeks.
Sometimes if there's enough left in the current account on the next pay day I put more into savings the next month.

Every few months I download a bank statement and put it into a spreadsheet to see what I could cut back on the next month eg- too many top up shops or too many Costa trips on my lunch break.

It works well for me but I think you probably need a good memory for numbers to do it my way.