When learning how to create a budget, you will inevitably come across the “envelope system.” The envelope system is a tried and true budgeting method, where you cash your paycheck, divide the money into budgeting categories, and put the money for each category into a designated envelope. When an envelope is empty, you don’t spend any more in that category.
The problem many people run into with the envelope system in today’s society, is that people no longer use cash. Without using cash, the envelope system becomes kind of obsolete. Until now.
Enter Money Folders. Money Folders is a desktop application that is based completely on the envelope system, down the the little envelope graphics used to display your budget category balances!
How Money Folders Works
After you download Money Folders to your desktop, it takes you through a setup wizard, where you can add your bank account information. This is completely optional, however. If you only want to identify your bank account as “Checking,” that’s perfectly fine. No websites, account numbers, or passwords are required.
I didn’t use the setup wizard, so I’m not sure I have the next steps in order, but they’re pretty basic. You set up your envelopes for your budgeting categories. For each envelope that you set up, a little envelope graphic appears on the screen. Later, you can click on these envelopes to see the activity in that budgeting category.
Then you set up your income sources. When you set up your income sources, you can automatically allocate your income into your various envelopes. Later, when you get paid again, you just have to click a couple of times to enter your paycheck info, and the money automatically shows up in the correct envelopes.
If you need to move money from one envelope to another, that’s easy, too, so your budget isn’t set in stone. I believe that’s a huge asset, as life happens, and no budget is going to work 100% of the time…at least in the first year.
What I Like About Money Folders
- It’s very visual, with the different envelope graphics
- You can automatically allocate money from your paychecks
- There are a couple of reports you can run, to see where you stand
- You can print out folder balance cards to carry in your wallet
- You can store bank info, usernames, and passwords for easy access
- You don’t have to store your bank info, if you don’t want to
- It’s an easy system for beginning budgeters
- Customer service is wonderful
What I Don’t Like About Money Folders
- You have to manually enter your receipts. That may not be a problem for some people, but it’s not for me.
- The application is mostly gray. I like lots of color. But that’s just a cosmetic issue, so I don’t think it’s a big deal.
My Overall Opinion
I think Money Folders is worth checking out, especially if you’re a beginning budgeter or someone who loves the envelope system. The desktop application is $29.95, though there is a free trial, so you can try before you buy. Also, it comes with a 30 day money back guarantee, so you can be sure of your purchase. AND if you enter the code “beingfrugal”*, you get 25% off the purchase price, bringing the total down to $22.46! That’s not bad for budgeting software, and good budgeting software, at that!
Stay tuned tomorrow for one more budgeting software review, as well as my regular Friday roundup!
*A reader sent in a question as to where to enter the code. Here is the response from Adam at Money Folders.
It is on the second page of the cart. The first page is where you enter in your contact information and email. After you click next, you get a screen to enter payment information. At the top of the screen is a place to enter a “coupon”. Click “Update Coupon” to see the total reflect the discount.
Photo by MG Shelton.
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The thing is…using cash actually ends up in your favor as you will spend less. It’s much harder to hand over the cash than to swipe a card. I know before I would add that coke for myself and snack for the ankle biter and not think anything of it…but on our cash system I won’t. It’s some mental Jedi trick I think! But supposedly there are stats to back this up – I don’t have them.
My husband introduced me to the envelope method 30 years ago. We are still using it. It works, if you have the discipline to leave the money in the specified envelope until you need it. Sometimes that is for one whole year. For a time we didn’t use the envelope method and I lost track of the money and never had it when those yearly, or bi-annual bills came. Thank you, Lynnae for posting this sort of blog. I wish all young people got this sort of information as they start out in life on their own.
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There is another personal finance program out there that is very successful and which is based upon the envelope method. It is called Budget. I would highly recommend that you check it out at http://www.snowmintcs.com. I use this program now instead of Quicken and find it works much better for me.
I have never been able to make the envelope system work, but this is very interesting. I might give it a try on a smaller level
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