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Envelope Budgeting

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Glenn Adriance

12 Mar, 2015 03:23 PM

Hi - in envelope budgeting you put some money in an "envelope" on a monthly basis that represents your budget for the spending that envelope represents - let's say $100 in the groceries envelope. Then you spend money and take it "out of" the envelope. So let's say I spent $75 in Feb on groceries. Now I have $25 left and in Mar I put another $100 in the Grocery envelope. Now I have $125. I spend $50 in Mar so in April I will now have $75 left and add another $100 so going into April I have $175. I can at anytime choose to transfer money from one envelope to another for whatever reasons.

MoneyDance does not work this way. I can set up all the categories/envelopes but there is no way to really do what I describe above. This makes the budgeting feature in MoneyDance useless to me unfortunately. Envelope budgeting is the same for every software that supports envelope budgeting but not for MoneyDance. Can you advise why this is?

1. 1 Posted by Alan Major on 12 Mar, 2015 05:04 PM

   

   Glenn

   Moneydance can be made to do what you want, I use it successfully for my envelope budgeting.

   What I have done is to use a series of sub accounts under a main parent account, e.g. a bank account, to represent the envelopes with one further sub account called 'Unallocated' to represent anything not involving an envelope. Spending from this account is taken one of the sub accounts as appropriate and all receipts go into the 'Unallocated' sub account. The envelopes are topped automatically by Reminder Transactions which auto-commit.

   This approach enables you to see instantly what is in each envelope and what is left over. When it comes to reconciling the bank account select the parent account and in the Reconcile dialog select 'Include Sub-Accounts'. It will be necessary to manually clear the transfers to the envelopes when reconciling unlike some other programs.

   HTH

   Alan

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2. 2 Posted by kevin.garber on 29 Jul, 2015 10:59 AM

   

   Alan,

   I am considering implementing your method for budgeting my primary accounts and had some questions. I am already using this method for a separate account that I use for a rental property where I have sub accounts for the maintenance, taxes, insurance, vacancy allowance, etc. This has been working great so far, but the bank account is dedicated for the rental property.

   My questions with doing this for my primary budget is how does it work with using multiple accounts (Checking/Debit, and Credit Cards) to pay for things? Lets say I create a separate Checking account where all of my money flows in and out of with the sub accounts for each category like mortgage, groceries, auto, utilities, etc., However, my expense categories span my checking account(s) as well as my credit card account(s). I charge just about everything, but will pay for utilities from my checking account and credit cards. Lets say I allocate $200 per month to my utilities and pay for half of them with my checking and half with my credit card. When I pay my credit card, it would be one line from the unallocated envelope. How do you balance the envelope when your payment methods span multiple accounts?

   Any help would be appreciated.

   Thanks,
     Kevin

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3. 3 Posted by Alan Major on 29 Jul, 2015 03:06 PM

   

   Kevin

   Thank you for your interest in my approach to budgeting. In cases where I
   have used my credit card to pay for items for which funds have been
   allocated from my chequing account I enter the payment to the credit card
   company while viewing the credit card account and split the amount between
   the unallocated and allocated sub-accounts which are part of my chequing
   account.

   Hope this makes sense and helps.

   Alan Major

   Sent from Samsung Mobile

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4. 4 Posted by kevin.garber on 29 Jul, 2015 08:47 PM

   

   Alan,

   Thanks for the clarification.

   Kevin

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5. 5 Posted by mike on 07 Aug, 2015 10:31 PM

   

   Damn, I was so excited about this software until I read this thread. I currently use an envelope based software, but it's old, and I thought this would be a modern replacement. Sadly, I cannot give up envelopes.

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6. System closed this discussion on 19 Mar, 2016 04:54 AM.