This might be an obvious one, but how can I tell which envelopes I have already filled for the month? I have some unallocated funds but I am not sure which envelopes I should fill…
Hi there – you can tell at a glance if you’ve previously Filled an Envelope if you’re using a Due Date on it (see the second section in this Help Center article for more information about that), but if it’s an Envelope without a Due Date, there’s no way to easily tell if you’ve already Filled it recently without referencing the transaction history for that Envelope for the month.
If you happen to have built up a month-sized cushion in your unallocated/savings, then you just fill everything 100% on day 1 and then replenish those funds from your income through the month. This is the “standard” way of envelope budgeting that GB is designed around.
Back when I started using GB, I was nowhere close to having that much in reserves. That was one of the primary reasons I started using envelope budgeting in the first place! But it’s hard to partially fill all your envelopes each week or two as a paycheck comes in and remember which ones need more and how much. For some, like Rent, it’s a bit easier because there’s only one transaction per month, but for others like Groceries or Gas where you are spending random amounts more frequently, it can be a real challenge to keep it all straight.
So I started using Unallocated as a kind of slush fund. On day 1 I would simply fill all my envelopes and Unallocated would turn a big red negative number. Then, through the month as I received income, it would backfill that Unallocated towards zero and then hopefully positive. This works well enough but that negative number can be quite alarming even though you are consciously using it to represent income you haven’t received yet. Eventually I learned more about accounting and have since refined my process.
The secret is creating another Account in GB named “Projected”. I have Checking, Savings, PayPal, Cash, and Projected. Near the end of the current month, I look at the payday calendar for the next month and add up all our regular paycheck take-home amounts. On day 1 of that month I make a single deposit for the entire month’s income into the Projected account and fill all my envelopes. Then I just go about entering my purchases into envelopes as normal. When a payday rolls around, instead of adding it as Income, I transfer that amount from Projected to Checking. At any given moment I can look at the Account balances and see what I have available to spend (Checking) and what I am still expecting to receive (Projected).
There are a couple of caveats with using this method:
The first is just because an envelope has been filled doesn’t mean you necessarily have the funds in your Checking account to spend yet. You might have to wait until later in the month after a payday before being able to spend an envelope.
The next is what to do if you get additional income you hadn’t projected, such as a gift or a bonus or a tax refund, etc. Simply record that as a regular income and allocate the money however you want.
The main issue is what happens if your projection is off? Once we come to the final payday of the month, I zero out the Projected account. If there was a positive balance then my projection was too high and my Unallocated balance will go down to cover the shortage. If Unallocated goes negative then I have to pull from some other envelope to fill that. If the balance in Projected is negative then we made more than we projected and setting the balance to zero will increase my Unallocated balance by the extra amount.
That is an interesting approach but it flies in the face of what envelopes are, to me anyway. I will only ever put real money in an envelope as that way I know I have the cash available to meet the outgoing. Seems little point in paying a bill out of a full envelope that is funded by an unallocated category that has insufficient funds. That must be the road to overdrawn bank accounts surely.
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I admit it’s a “creative” abuse of GB’s intended functionality, but for me it is an enhancement. It doesn’t feel right to me to plan the next month’s outgo without also accounting for its income.
I can understand the fear of spending money that isn’t there yet, but in all honesty it’s never happened. Even back in the early days when things were literally paycheck to paycheck. GB always shows what is actually in the Checking account, so it’s never been an issue. It’s just a slightly different mindset to see the envelopes as a plan rather than strictly holders of cash.
We all do it the way that fits but I think I would rather just run a basic financial software package and post all the scheduled/upcoming payments (and known income if you like) on the first of the month but with the correct value date. The cash flow in and out would be clearly laid out and no messing with fills and the like.