Surprise Expenses

Car Meets Tree

Car Meets Tree

During a Money for Life Coaching Session the other day I noticed that my clients had a few envelopes that had gone into the red.  I asked them what had happened, and they explained that some unexpected expenses had arisen due to a family event, a forgotten bill, etc.  We talked through a few different ways they could balance out the envelopes (envelope to envelope transfers, using the sweep feature, etc.) and reviewed why it’s so important to keep the envelopes from going into the negative.

Overdrawn envelopes basically mean that you have overspent your allocated amount for that category.  It’s not the end of the world. Things happen that cause you periodically to overspend.  The critical thing however, is that you get the envelopes balanced out as quickly as possible so that you know how much money you truly have available to spend.  If one envelope is negative $10, and one is positive $10, than in reality you have $0.

While they were convinced that this was a one-time thing, and that they wouldn’t have unexpected expenses again; unfortunately, that just isn’t realistic.  Unexpected expenses happen, that is just the way life is.  The way you handle it however, determines if it will derail your spending plan or just be a small bump in the road.

When unexpected or surprise expenses occur balance out your envelopes as quickly as possible, and then review your spending plan to better plan for these types of expenses in the future.  That may mean adding a new envelope, or perhaps readjusting the way you are funding existing envelopes.  The key is to learn from this experience and work to avoid it in the future.   The same thing may not happen, but I assure you, somewhere, sometime, something unexpected will need to be purchased.

Purchasing an outfit for a last minute family event may not be exactly what happens next time, but perhaps you’ll be out for the evening and break the heel off your shoe?  You may have extra pair of shoes in the car, or maybe you’ll have time to run home and change… or perhaps you’ll have to stop and pick something up because it’s an important occasion that you just can’t miss.

Jennifer Streiff
Money for Life Coach

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

We now have the level of detail in tracking expenses we wanted (real time)!

Michael and Jana

Michael and Jana

A few weeks ago, Michael, from San Antonio, Texas, shared with us the following comments:

When my lovely wife (Jana) and I got married about 3 and 1/2 years ago, we had to mesh our personal finances together–just like any couple. We both consider ourselves financially savvy–me being an accountant and Jana with banking experience and formerly a bookkeeper, but we simply weren’t happy with the methods we had in place for tracking our expenses, or the popular personal finance software available at the time. Keeping up with receipts was tedious for the number of transactions we do and our process seemed more time-consuming than it needed to be. We desired a better tracking system and we wanted a solution quick before the frustration started affecting our marriage. We started doing research and Jana found Mvelopes online one day, so we decided to give it a trial run. We’ve been using it ever since and haven’t ever looked back. We now have the level of detail in tracking expenses we wanted (real time!), we save incredible time, and we have a peace of mind knowing our finances are running smooth and in order. Mvelopes is one of those things you see in a futuristic movie and hope comes to reality soon. My dream was realized. Thanks Mvelopes team!

I recently had the privilege of speaking with Michael about his and Jana’s Mvelopes experience and gained the following additional insights into their use of this wonderful product.

Q:  How long have you been using Mvelopes?

A:  For about two years.

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

A:  Obviously, it forces us to stick to our budget.  We are huge Dave Ramsey fans and have learned a lot from him.  He has taught us how important it is to stick to our budget.  We never have to wonder if we have money.  We can check it right now–even on our cell phones.  It’s pretty cool.

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

A: We became debt-free in 2007, prior to using Mvelopes.  But I’m sure Mvelopes would’ve helped had we known about it beforehand (laughs).

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

A: A lot, actually.  We’ve saved enough to purchase a used car ($9,000.00), enough to go on a cruise (Cayman Islands), and enough to give a large portion of our money away to people who need it.

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

A: Again, an enormous amount–about four or five times what it used to be.

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

A: We have obtained a large net worth (one that we were aiming for) and we have streamlined and simplified our budgeting process, thanks to Mvelopes.  It used to take us about two hours once a month to work on our budget.  Now it takes us about 30 minutes.  We’ve also been able to purchase large assets with cash.

Q:  What are your next financial goals?

A: We plan to invest more of our income-we’re already investing 7% and plan to bring it up to 15%.  We’re also planning to save for our first house and pay cash for it.  We’re about halfway there.

Q:  How many envelopes have you created?

A: We have 50-60 Mvelopes.  We are both kind of nerds about it.  My wife is a bookkeeper and has a financial background and I’m an accountant.  I don’t know if Mvelopes is intended to be used this way, but we kind of have a budget within a budget.  When we spend money for things we’ve been saving for, like new furniture, we’ll spend it from our checking account and then take the money from our savings account to credit the checking account.

Q:  How has Mvelopes helped to reduce financial stress?

A: Not having to wonder–Did I just spend that money that should’ve gone to pay for my utility bill?–or whatever.  You don’t have to worry about bouncing checks.  You know what’s there, in real time.

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

A: It helps me communicate with my Jana better.  We can both log into our account and can both see what our status is.  We can check it while we’re in the grocery store with our Smart Phone.  It’s really nice.  It makes things quick and simple.  We still sit down and talk together, but there are fewer of those interactions.  When my wife and I plan to spend anything over $100, we will sit down and have a budget committee meeting and discuss where we’re going to be pulling that money from.  We can now move money around right there and then without having to discuss every single transaction.  It’s nice and easy.

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

A: Sit down and do it.  You’re not going to start seeing change in your financial life until you sit down and start making a plan with your money, and Mvelopes will help you do that!

At the conclusion of my interview with Michael, I asked him if there was anything else he’d like to add, and he said this:

After discovering Dave Ramsey, my wife and I paid off over $30,000 in debt in two years, and that was on a pretty modest income.  My wife and I are Financial Peace University coordinators teaching the Dave Ramsey plan and we use Mvelopes to help us implement his plan.

It’s obvious that Michael is passionate about budgeting and that he and Jana have found what works for them.  It was truly delightful speaking with him.  He even turned the interview around and started asking me questions about budgeting, about my knowledge of Dave Ramsey’s plan, etc.  Michael and Jana, we wish you much continued financial success and happiness!