The smaller the tax refund, the better

Tax Time

Tax Time

I have an Mvelopes coaching customer that purposefully has extra money withheld for taxes so that he gets a larger refund at tax time.  During the year he relies on credit cards to get by if he doesn’t have enough income.  He carries a balance on those credit cards and then uses the tax refund to pay the balances off.  This may sound like a pretty smooth way to handle things, until you really start looking at how much this method is costing him.

First, he is allowing the government the use of his money throughout the year, rather than having access to it himself.  If he had this money in his bank account, he would have an easier time living within his income, and wouldn’t need to rely on credit cards to make up the difference.

The second problem is that by carrying a balance on his credit cards throughout the year, he is spending a lot of extra money on interest charges.  Using credit cards can be a great way to earn miles, points or extra cash, but it’s only effective if you pay off your balance each and every month so that you don’t have interest charges.

The third and final problem with this method, and perhaps the biggest issue, is that he was simply planning to overspend his income going into each year, rather than making the effort to live comfortably within his means.   Spending less than you make on a consistent basis is truly the best way to improve your financial future and increase your wealth.

After being introduced to Mvelopes and the principles of envelope budgeting, he is now dedicated to living within his means and is working to adjust his tax withholdings.  Hopefully this year he will realize that having that money available for his own use is far better than letting the government borrow it for a year without paying him any interest.

-Jennifer Streiff, Mvelopes Personal Finance Trainer

Break the Habit

reset_buttonRecently I’ve had a few Money for Life Coaching clients that have developed a habit of resetting their Mvelopes account whenever they get a little behind.  Instead of spending some extra time to get things caught back up and balanced out, they just simply erase it all and start over.

While starting over may seem like a great idea, this behavior is little bit like hiding your head in the sand.  Instead of learning from their spending habits and working to live within their income and their envelope balances, they are just cleaning everything out and pretending that it didn’t happen.

If you get behind in your Mvelopes account, or you over spend in a few areas… don’t hide your head in the sand.  Break the resetting habit and learn from your previous spending.  Use it as motivation to not get behind again and as motivation to log in more often so that you don’t overspend again.

One of the keys to not overspending is to know what your envelope balances are at any given time.  If you know how much money you have left to spend in each envelope, you can make informed spending decisions.  Logging in to Mvelopes frequently and keeping everything up to date will keep your information up-to-date and your envelope balances accurate.

If you get a little behind, spend some extra time and get caught up as soon as possible.  If you overspend in one area, transfer money from other envelopes until there are no negative balances. Only then will the information in Mvelopes help you build a more stable financial future.

Jennifer Streiff
Money for Life Coach

[photo courtesy of flickr / CC BY-SA 2.0]

Help Mvelopes help you–really use it!

Steven and his son

Steven and his son

Recently, Steven (from New York) sent us the following comments about the success he has found using Mvelopes.

I’ve been using Mvelopes now for about 2 years. All I can say is that this application has turned my life around. Before Mvelopes I lived paycheck to paycheck–most of the time not having enough to pay all my bills. Since I started subscribing to the Mvelopes service I have gained a much better picture of my spending habits and have been able to learn and gain the discipline necessary to achieve my financial goals. I’m writing to you now having reduced my monthly bills, paid off all of my credit cards, and saved a five digit figure toward the purchase of a house. I am finally free of the endless credit cycle. Now when I want to make a big purchase, I can pay for it in cash knowing that Mvelopes will be there to help me track my purchases and continue to avoid getting over extended. Thank you to every member of the Mvelopes team for helping to create such a life-altering product.

In a follow-up telephone conversation I had with Steven, I asked him to share just a bit more information about his amazing success.  Steven answered the following questions.

Q:  How long have you been using Mvelopes?

A:  About two years.

Q:  How has Mvelopes assisted you in living within your income?

A:  It gives me a much better picture of my spending habits, for starters, and being able to categorize things into different envelopes is extremely helpful.  When your paycheck comes in, you have a predefined spending pattern.  For example, if I have a bill–let’s say my car payment–I know exactly what I owe and can divide that out.  I was not living within my income prior to using Mvelopes.  I was caught in the credit cycle, like many people today.  When I would have a life event happen (car repairs, etc.), because I was living paycheck to paycheck, I had to draw on my credit to pay bills.  I also played the “balance transfer” game, obtaining larger credit limits with lower interest rates.  At one point I started thinking, how am I going to dig myself out of this hole?  Eventually you get to the point when you realize that you’re so deep down into the hole that it feels overwhelming.  My grandfather lived to be 93 years old and he taught me that in order to get to the light at the end of the tunnel, you have to start walking.  I think that’s where the Mvelopes product really shines.  It takes away the fear.  It teaches you to start walking.

Q:  How much consumer debt have you been able to eliminate during that time?

A: I probably cleared up about $20,000 of consumer debt.  I estimated that it would take me about 10 years to get out of debt, and then I figured it would take me another 10 years to save, but I’ve been amazed at how quickly I was able to find success.

Q:  How much have you been able to save while using Mvelopes?

A: I have saved about $12,000 for a down-payment on a house.

Q:  How much has your average checking account balance increased while using Mvelopes?

A: In the past, the money in my checking out literally went out of the account as quickly as it went in.  I don’t believe my average balance was ever above $500.  My financial institution pays interest with a specific minimum balance, and now my balance never falls below $1,500 and can stay upwards of $3,000 for quite a long time.  The only reason the balance decreases is because I’ll occasionally transfer money to the house savings account.

Q:  What financial goals have you achieved while using Mvelopes?

A: When I started using Mvelopes, I had three separate goals.  First, I wanted to eliminate all high interest credit card debt by and adjust my spending habits.  I planned to make more than the minimum payment and close the accounts when I paid them off.  I am pleased to say that I have been consumer debt free for quite awhile now and I still don’t have a credit card.  I will not do that again!  My next goal was to eliminate all unnecessary loans.  I had a couple of loans that were kind of unsecured things.  Now I have one loan for the vehicle that I currently drive and, in actuality, I am making larger payments and will have it paid off in 3 years, rather than 5.  My third goal is to create a nest egg for starting a family and building a house.  Then I will start a retirement plan and build it.

Q:  What are your next financial goals?

A: I figure that since I’ve been able to accomplish what I have, my future financial goals are to become independently wealthy.  I want to get to a point in my life where I work because I want to, not because I have to.  I’ve decided to up the ante.  The area where I live is forever plagued with layoffs.  I have seen far too many of my friends get laid off from jobs where they have worked for decades.  I want to be in a position, at some point in my future, so that if I lose my primary employment, it’s not going to kill me.

Q:  How many envelopes have you created?

A: Somewhere in the range of 15-25.

Q:  How has Mvelopes helped to reduce financial stress?

A: One thing that it does is it makes reconciling my checkbook a breeze.  The overall concept really helped to reduce my stress, especially when I realized I was well on my way out of the vicious credit cycle.  I was able to take a breath and know that things truly were going to be all right.  Once I got a couple of bills paid off, I was able to take the money that I was spending on those and apply them to other things–and I was even able to occasionally treat myself for doing such a good job.

Q:  If married, how has Mvelopes helped you better collaborate with your spouse?

A: I started using Mvelopes prior to the start of the relationship I currently have with my girlfriend.  Once we got to the point in our relationship where we became serious, we sat down and talked through our financial situation.  We made things fair with the joint bills and we adjusted our automatic deposits to match.  We are probably the only couple I know that doesn’t fight about finances.  We make adjustments and collaborate probably on a weekly basis.  When you’re living paycheck to paycheck, you are constantly checking balances and worrying.  Now my financial world consists of focusing on things for about 5 minutes on a Saturday and if I’m not near a computer, I can always use the mobile version.

Q:  What advice would you give to new Mvelopes users?

A: Definitely go through the tutorials.  Once you’re through the tutorials, try to nail down the concept, and play with the application.  Don’t fear that it’s going to do anything with your money.   It doesn’t actually move your money-it just mirrors your account register, so don’t be afraid of it.  If you screw something up, there’s always the reset tool.  Help it help you!

Q:  If you could create a “tag line” for Mvelopes–keeping in mind what it’s done for you–what would the tag line be?

A: Well, as I just said, “Help it help you!”

I truly had a delightful time speaking with Steven.  His excitement about being free from the vicious credit card cycle is inspiring.  I especially appreciated the comment he shared from his grandfather.  Steven, thank you so much for taking time to speak with me and for sharing your success with us!  We wish you continued financial success and much happiness.

Now I Know Why I Never Had Any Money Before–It’s The Awareness!

Mary and her family

Mary and her family

Because of the increased interest in our coaching program, and because of its growing success, I’ve chosen to spotlight another coaching success story.  I recently had the privilege of speaking with Mary from New Jersey.  Mary and I discussed her coaching experience and her Mvelopes experience, generally.  Our discussion follows.

Q:  How many coaching Sessions did you complete?

A:  Ten.

Q:  What coaching session(s) did you find most valuable?

A:  The first couple of sessions were definitely the most valuable because they helped me better understand the system and how to work it and maneuver it.

Q:  How has the coaching program helped you take control of your money?

A:  I signed up for Mvelopes a few years ago–without the coaching–and I didn’t get very far with it because I didn’t really understand it.  I let the program sit dormant for awhile.  Then after receiving a couple of e-mail messages discussing the coaching program, I decided to try it.  After the first few sessions with Lori (my coach), I was able to really understand how to use the program.  In fact, it got me excited to use it.  I have tried to budget on my own for many (20+) years and I’m finally being successful!

Q:  How has the coaching program helped you reduce consumer debt?

A:  Consumer debt really isn’t an issue for me.  What was an issue was that my husband and I were living paycheck to paycheck and we needed to learn to better manage our finances.

Q:  How has the coaching program helped you reduce your stress related to money?

A:  Well, it’s been huge.  Now I have an envelope for all the expenses that we incur that maybe we don’t know we’re were going to incur.  And the really great thing is that if there isn’t an envelope created, but I find I need one, I can easily put one in place and know that sometime down the road I’ll have the money to cover whatever it is.  That has really helped to reduce a lot of stress.  Now, when my husband says, “We’ve got to do this …” or when we’re facing a costly repair bill, I don’t worry because I’ve got the money to cover it.  Things are getting put into place.

Q:  How much has your budgeting and money management knowledge increased since you started the coaching program?

A:  As far as budgeting and money management knowledge goes, I have always had the knowledge of how it was supposed to work, but I just wasn’t good at applying what I knew.  In the past, I’ve felt that money controlled me, and now I know how to control my money.  I’ve always felt that we never had enough money.  We were living paycheck to paycheck.  It was hard to save money.  Now we have a plan.  I’ve tried to budget by hand, without much success, but the computer and technology made it so much more effective.  I’ve found the right tool.  Visually it works for me.  It’s a fun program.

Q:  How much has the knowledge of the envelope method helped you manage your money?

A:  It helps me to be aware of where my money is going and how many envelopes I have.  Now I know why I never had any money before–it’s the awareness.

Q:  How have your attitudes about budgeting and money management changed since you started the coaching program?

A:  I’m much more relaxed now.  I feel I have better control.  So my attitude is no longer one of frustration and aggravation.  I have a much better attitude.

Q:  How has coaching helped you gain a clear overall picture of your spending?

A:  Awareness, again.  I liked the coaching more for understanding how to use Mvelopes–maybe not so much the nitty gritty of it.  Lori would go over the different points and she would help me implement those things.

Q:  How has your Mvelopes usage changed since starting the coaching program?

A:  I went from not using it at all–or very little–to using it pretty much every day.  I’m certainly no longer afraid of it.

Q:  What advice would you give to new Money for Life Coaching participants?

A:  My first thought is to definitely do the coaching.  Stick it out for at least 2-3 sessions.  It’s what I needed to get going.  Definitely use it.

After speaking with Mary about her coaching experience, I then asked her questions regarding her overall Mvelopes experience.

Q:  How long have you been using Mvelopes?

A:  Six months.

Q:  How much consumer debt have you been able to eliminate during that time?

A: I don’t have much consumer debt.  I have a line of credit that I still need to clear up, but Mvelopes has helped me develop a plan to pay it down.  I also have a car payment.

Q:  How much have you been able to save while using Mvelopes?

A: I haven’t been able to save.  It was a hard year because we didn’t have the money we’ve normally had to use, but we’re optimistic that we’ll be able to save in the future.

Q:  How much has your average checking account balance increased while using Mvelopes?

A: I was always close to being in the negative, but now we maintain approximately $5,000 in the account.

Q:  What financial goals have you achieved while using Mvelopes?

A: Peace of mind.  Now I know that I’m doing something positive about my financial situation.

Q:  What are your next financial goals?

A: To build a savings account.  I have one child in college and another one rapidly approaching that age and I want to have money for that.

Q:  If married, how has Mvelopes helped you better collaborate with your spouse?

A: This has always been our biggest area of argument, “Where did the money go?”  It has definitely helped in that area.  Now I have a plan and can better show and explain things to my husband.

Q:  What advice would you give to new Mvelopes users?

A: Sign up for coaching right away.  Take the money that it costs for coaching and put it in your envelopes.  Don’t get frustrated.  It will give you peace of mind.  It’ll give you a plan.

It was a pleasure to speak with Mary.  She is very enthusiastic about her future financial picture and she is confident that she has found the solution to her budgeting issues.  She is no longer afraid to face her finances.  In fact, she enjoys seeing the progress that she’s making as she successfully budgets her money.  Mary and her husband are no longer living paycheck to paycheck.  Keep up the great work, Mary.  We wish you and your family much continued financial success.