Ever heard of an emergency fund? I hadn't until after I got married and the husband and I were trying to figure out how we were going to manage our finances.  We read books and researched the best way to get out of debt and save for the future.  That's when I learned about an emergency fund.  Basically and emergency fund is money that you save and promise never to touch except in case of an emergency.  What constitutes an emergency?  Well, that's really for you to decide.  So far we have used our emergency fund during job loss.  I'm hoping that's the only time we will have to use it.

How much savings is enough for your emergency fund?  I've heard many "financial experts" talk about different amounts (3 months salary, 6 months salary, 1 year salary).  The real question should be:  How much do you need in your emergency fund so you can sleep well at night?

I'm a worrier.  I always have been.  Especially about money.  Even as a child I would worry about financial matters that I shouldn't even have been thinking about.  So for me this amount will be higher than for someone who is not a worrier.  Take my sister for example.  I've never really known her to worry.  I've seen her in some tight financial spots that would have sent me to my grave, but she took it all in stride.

I think the best way to calculate how much you need would be to add up all your regular monthly bills (this includes utilities, groceries, gas, etc.).  Add in a few hundred dollars for miscellaneous items that may pop up.  Now multiply that by how many months you would expect to be out of a job.  Now multiply that by three.  If I used this formula then I think I could come up with an amount that would allow me to sleep at night.

Give it a try and see what amount you come up with.  Are you close?  Keep working at it...you'll get there in time.  Just don't give up.  And remember, your emergency fund is for emergencies only.  That shiny,new car can wait.

The envelope system of budgeting has been around for a long time.  I know people who mention that their grandparents used this method.  It's stuck around all this time because it is a good, solid way to budget for the things we spend our money on everyday. 

There are many ways to implement the envelope system.  The original method is cash basis only.  Money is allocated to actual paper envelopes.  Once the cash is gone from that category then that is it.  No more spending for that category.  In today's world there are many that don't use cash much anymore.  I am one of them.  I really like to use my credit card.  I really like getting the points my credit card company gives me.  Since I use my credit card instead of cash then I couldn't use the original version of the envelope system.  Fortunatly there are lots of software programs available that allow you to use virtual envelopes.  I use one of them in my planning my personal finances.  In case you haven't guessed...I use IntelliPenny.

IntelliPenny allows me to set up virtual envelopes and it allows me to use my credit card to make my purchases.  I have found the envelope system to be very easy to implement and easy to maintain.  The amounts that go into each envelope can be tweaked to match my needs at that time.  If I find that I am accumulating an excess in one envelope then I can transfer money from it into a different envelope.  I've had to do this in the past.  For example, I have an envelope that holds money for eating out.  If I don't go out to eat as much as anticipated then I'll move some of that money to my groceries account.

The envelope method helps keep me in check.  I don't like to see my envelopes emtpy, so every time I spend I think about it.  No more mindless spending.  Do I really need this new shirt? What about this new cereal...will I really eat it?

The envelope system won't solve all your financial woes.  It takes some amount of discipline to work with a budget.  It also takes a few months to get your budget tweaked the way you want it.  But if you are willing to make a change, give it a try and see how it can work for you.

I've been using the envelope system of budgeting for a few years now.  I got started using it because I was looking for a way to solve the problem of not having money set aside when unexpected bills arrived.  Every time an unexpected bill arrived in the mail I would cringe.  How was I going to pay for it?  Where was the money going to come from?

When I ran across the envelope system it was actually under a different name.  I was reading a book where the author called them "freedom accounts".  I started with just a couple items that I felt would be an immediate benefit to me. 

The first envelope account I created was for car insurance.  I knew that if I could pay my car insurance every six months instead of every month that I would save on my car insurance premiums.  I divided my insurance premium by the number of times I got paid within a six month period and that is how much I would set aside every paycheck.

The second envelope I created was for medical expenses.  There were always bills coming in the mail for medical expenses that were not planned for.  We had medical insurance, but you know how it goes.  You go visit the doctor and pay your copay at the time of your visit.  Then a few days, weeks, or months go by and you start to get bills in the mail for items that insurance refused to pay or items that were not covered under insurance.  So I wanted this envelope to help me cover these out-of-pocket medical expenses.  This amount was a little more difficult to compute.  I had to estimate how much was spent per year on out-of-pocket medical expenses.  The I divided that number by the number of times I got paid in a year. 

Since I use IntelliPenny as my financial manager once I had these amounts calculated the rest was easy.  I simply created my new envelope accounts under my checking account.  Then every time I got paid I would run the "Automatic Envelope Deposits" function and money would be automatically allocated to my envelope accounts.  In IntelliPenny the balance of my envelope accounts is deducted from my checking account to give me an "Available Balance".  Even though the money is still in my checking account my available balance in IntelliPenny only shows me how much in my checking account is really available for spending.  The rest is allocated to other expenses.

Once I saw that using this method of budgeting was very beneficial to me I started creating envelopes for other items.  I created envelopes for auto expenses, gas, groceries, gifts (these were always eating away at my income), and bills.  As time went on I got even more detailed in my envelopes.  I created envelopes for car tags, eye care, dental care, vacations, eating out, property taxes, and clothing.  Now almost all of my expenses are allocated in an envelope.  I've got envelopes for items that come around only once a year.  It's so nice when that bill arrives to know that the money for it has already been set aside and I don't have to worry about where the money will come from.

The envelope system has helped me get a handle on my expenses.  Give it a try and see how it can help you!