Managing Cash Flow/Virtual "envelopes"

[ReP]

Our goal is to live artificially "from paycheck to paycheck" in terms of our regular expenses and automate as much savings/investment as possible. I think we could be saving even MORE but it would require us to manage cash more carefully. I know it's purely personal and there are a lot of "ways" - but how do you all handle your cash flow re: regular monthly expenses differentiated from irregular expenses/cash sink-funds (my understanding of a sink-fund is that it's "plan to spend", not "save for an undetermined time" i.e. a cash-savings fund for a house down payment or something).

If you use "envelope" method, how do you like to keep your cash divvied up?

[Ebrat]

I like YNAB for doing this.

[ReP]

I use Alliant Credit Union's supplemental savings accounts - they only have 1% interest but that's better than you'll find at most banks.  I opened one supplemental account for each 'envelope,' named each account to remind myself what it's for and that I can't touch it for anything else, and arranged automatic transfers from my checking to each envelope on the 1st and 15th of the month (when my paychecks go through). I also set Vanguard to auto withdraw on those dates.

It's always very clear what's available for spending this way, since everything not earmarked for other purposes hangs out in my checking. I move money from an envelope to my checking account if I have an expense come up that I've budgeted for. I can also easily use the auto transfers to break up yearly expenses that are useful to have in cash, into monthly goals that are ready just when I need them with no input on my part. Dead simple.

Thanks - I had imagined doing something like this. How granular do you get? (As in how many accounts). We already direct deposit into a seperate "discretionary" checking account at a credit union (everything but shelter, food and transportation pretty much) but I'm finding that covers too many categories (clothing, travel, blah blah) and the budgeting is a pain. We also didn't have a way to separate non-discretionary, irregular spending (car maintenance for ex.) but I'm thinking maybe we'll just let the budgeted amount for this pile up in the regular checking.

[ReP]

I like YNAB for doing this.

We use Mint but I find it a little burdensome to keep training it. Maybe I should switch to YNAB as I heard it's more hands on. Are the budget categories completely customizable? I hate breaking down our budget into splinter categories - I just don't find it useful. For instance I want groceries, eating out and non-durable goods like cleaning & toiletries all to go into the same "bucket". This is absurd in Mint - but I do like to use it as a capital tracker.

And since YNAB requires you to categorize transactions, how do you track sink-funds - i.e. money you're NOT spending but plan to at some point? Or do you actually use separate bank accounts and categorize your transfers into whatever categories you are saving for?

[Nudelkopf]

How granular do you get? (As in how many accounts). We already direct deposit into a seperate "discretionary" checking account at a credit union (everything but shelter, food and transportation pretty much) but I'm finding that covers too many categories (clothing, travel, blah blah) and the budgeting is a pain. We also didn't have a way to separate non-discretionary, irregular spending (car maintenance for ex.) but I'm thinking maybe we'll just let the budgeted amount for this pile up in the regular checking.

I have a few linked accounts with my bank - this is how I have them named & broken down:
'My Expenses': for my own discretionary spending on sport, gym, social events, phone bill etc.
'Joint Expenses': household  stuff like groceries, internet, electricity that I split with my partner.
'Holidays': flights, travel, & spending money while on holiday (vacation).
'Emergency Fund':  currently  has about $12k (6-ish months expenses)
'Investment Fund': I let this build up to buy shares.

I don't have a car, but if I did want to buy one I think I'll start a 'Car Account' for those expenses. Any more than this & it starts to get annoying.

I stopped using YNAB as I found it too hard /time consuming to get it to work the way I want with transferring money around each pay.

[stashgrower]

I keep multiple bank accounts. Level of granularity has varied depending on life stage, but basically it's something like daily, short-term savings, long-term savings.

[dreams_and_discoveries]

I keep it simple and have one current account only that I use.

Keep an excel cashflow tracker with expenditures to see when I need to rejig things, cut back in spending or move more to investments. I don't do a sinking fund, as I've got enough spare income to cover most eventualities with a high savings rate.

[Ebrat]

I like YNAB for doing this.

We use Mint but I find it a little burdensome to keep training it. Maybe I should switch to YNAB as I heard it's more hands on. Are the budget categories completely customizable? I hate breaking down our budget into splinter categories - I just don't find it useful. For instance I want groceries, eating out and non-durable goods like cleaning & toiletries all to go into the same "bucket". This is absurd in Mint - but I do like to use it as a capital tracker.

And since YNAB requires you to categorize transactions, how do you track sink-funds - i.e. money you're NOT spending but plan to at some point? Or do you actually use separate bank accounts and categorize your transfers into whatever categories you are saving for?

Yep, the categories are completely customizable. There are "category groups" and categories nested within them (e.g., I have a Bills group with categories like mortgage and utilities; and Regular Spending group with categories like groceries, pet care, etc.;  an Irregular Spending group with categories for travel, etc.; and a Savings category).

Every time you get paid, you allocate money to the different categories. Whatever you don't spend accumulates in the category. So I put a certain amount in the insurance category every paycheck even though I only pay it a few times a year. The idea is to use the categories to track available funds for different expenses instead of having to have a bunch of different accounts for different expenses (a method that didn't work for me).

I also feel like it creates a sense of scarcity that makes me more careful with my money. Instead of seeing a big bank account balance, I see I only have $50 for clothes, or $300 for travel or whatever. The money's all spoken for.

[ReP]

I like YNAB for doing this.

I also feel like it creates a sense of scarcity that makes me more careful with my money. Instead of seeing a big bank account balance, I see I only have $50 for clothes, or $300 for travel or whatever. The money's all spoken for.

That's exactly why I think it could be a good system for us. We've gotten much better lately about asking the bigger questions when we're about to make a purchase such as "do we really need this?" etc. but in general I think we're more likely to stay on track without seeing that big bank balance. Right now we just have thousands extra in our checking doing absolutely nothing for us and I'm trying to figure out how much we could put to work for us vs. having some short-term savings on hand.

[ReP]

I don't do a sinking fund, as I've got enough spare income to cover most eventualities with a high savings rate.

This is how we operate right now. We try to live reasonably, save high and as a result always have extra money when we need to pay for car repairs or buy plane tickets. But I think if we categorized a bit more (I think a spreadsheet system like yours is great but one I wouldn't maintain...) we'd end up saving more. I always thought the point of the high savings rate was to have as much of that extra cash working for you in investment or retirement accounts - so not necessarily liquid when incidentals come up. We're trying to limit how much extra cash we have so more can "go to work" for us :)

[Learner]

When we still had some den I would use "high interest eSavings" accounts (14 at the most, down to the level of "replacement tires") at Royal Bank.  Realized it was better to track virtually via spreadsheet, and have most funds sitting on the line of credit to reduce interest costs.  Recently became debt-free and have to revisit mechanics.  I will probably dump the majority into automatic investments, and continue to manage day-to-day via spreadsheet - I like the ability to easily slice data different ways depending on what I want to inspect.