Money for Life Applied Principle #10 – Create a Spending Plan Part II

applied_principles_101Creating a spending plan can be challenging, but it is an essential step to creating success with an envelope budgeting system.  In a recent post, we outlined the first step in creating your spending plan: how to define your net monthly income.  Step two involves defining your areas of spending.

STEP 2: Define areas of spending, otherwise known as your envelope spending accounts

“Once you have defined your net monthly income, you are ready to define your areas of required spending. For purposes of consistency, let’s call these envelope spending accounts. Remember from our earlier discussion that there are two types of envelope spending accounts: monthly and periodic. Monthly envelope spending accounts are areas of spending that have spending activity each month. Periodic envelope spending accounts are areas of spending that have spending activity only periodically—for example, quarterly or even annually.”

“Let’s first deal with the monthly envelope spending accounts. Monthly envelope spending accounts can be either required or discretionary. Monthly required envelopes include things like car payments, the minimum or planned payments for credit cards, mortgage payments, etc. Because saving something first is a very important principle to adopt, you should also set aside a fixed amount each month for savings. Monthly discretionary envelopes include things like groceries, eating out, clothing, entertainment, allowances, etc. On a sheet of paper write down each of the monthly envelope spending accounts that are applicable to you. Separate these into required and discretionary.”

“Second, let’s address periodic envelope spending accounts. As with monthly envelopes, these also can be split into required and discretionary spending. Periodic required envelopes include things like property taxes, periodic insurance payments, annual auto registration fees, etc. Periodic discretionary envelopes include things like gifts, vacations, house maintenance, holiday spending, etc. On your sheet of paper, write down each of the periodic envelope spending accounts that are applicable to you. Separate these into required and discretionary.”

Once you have your list of envelope spending accounts, you are ready to define the amount of money you will need for each envelope.

Contains excerpts from Applied Principle 10, Money for Life, by Steven B Smith

Update on the Mvelopes app for iPhone

We wanted to let you know we’re aware of some stability issues with the Mvelopes iPhone app. We’ve identified a number of these issues and we’ll have an update available ASAP. Thank you for your feedback! We’ll keep you posted on our progress. If you’d like to report any issues you have had with the iPhone app, please tell our support team by going to


Mvelopes iPhone app now available


Leader in On-Line Envelope Budgeting Brings First Comprehensive Envelope Budgeting App to iPhone® and Android™

Mvelopes® introduces iPhone and Android apps to provide users live access to their personal financial data and real-time completion of transactions from smartphones using the principles of envelope budgeting.

South Jordan, UTAH – February 17, 2011 – Finicity® Corporation, the developer of Mvelopes, the only award-winning, comprehensive envelope budgeting system on the Internet, announces the new Mvelopes app for Apple® iPhones and Android smartphones.

“This is a great day for current Mvelopes users and for anyone who wants a complete envelope budgeting solution for their smartphone,” said Steve Smith, President of Finicity. “We have invested significant resources to make sure the Mvelopes app exceeds the expectations of iPhone and Android users and provides the most comprehensive and easy-to-use tool available to do personal envelope budgeting with a smartphone.”

Mvelopes is the first personal envelope budgeting app to offer real-time synchronization with a web-based client server. This means users can access, add, change, or delete their financial data while on the go. Mvelopes also allows simultaneous access by multiple users. One household member could be checking balance information from a store check-out line at the same time another household member is entering data from a home computer or his or her own smartphone. Mobile users can even use their smartphones to take pictures of receipts and attach those pictures to transactions as documentation.

The Mvelopes app provides location-based services using the latest in proximity technologies. Using the Check-In feature, Mvelopes users can automatically create expense transactions from checked-into locations. The app also uses location-sensitive envelopes to let users quickly see envelope balances and spending categories typically used at checked-in locations.

Tyler Park, Director of Product Management, explained, “Because the applications are so easy to use, people can jump into the apps while waiting in line or grabbing a bite to eat. They can assign transactions or match up pending transactions, quickly and easily updating their finances without having to wait until they get home to their personal computers.”

The Mvelopes iPhone app is available now in the Apple Apps Store. The Mvelopes Android app will be available shortly in the Android Market. Learn more about the Mvelopes app, Mvelopes, and Finicity Corporation at

Finicity Corporation was founded in 1999 and is a leading Internet and mobile software services company specializing in personal financial productivity applications. Mvelopes, first released in 2002, is the leading personal envelope budgeting solution available today. Honors include: PC World 2006 World Class Award; Named one of “The 100 Best Products of Year” by PC World’s editors; and Named one of “The 4 Best Money Managers” by Success Magazine. Envelope budgeting principles are used by millions of people throughout the world. These principles teach users to initially allocate their income to spending categories, called envelopes, and then to spend from individual envelopes for expenses assigned to those envelopes.


Delilah De La Rosa


David Hansen


Money for Life Applied Principle #10 Part I – Create a Spending Plan


Once you have determined that you want to use the principles of envelope budgeting, you need to develop a spending plan.  Let’s get started with the first step of defining your net monthly income.

Step 1: Define your net monthly income

The first step in developing your detailed spending plan is to determine how much money you have available to spend.  In other words, you need to determine your net income.

For fixed income sources, this can usually be calculated very easily. Most of you receive a paycheck that represents your net pay. This net amount is what’s left after taxes and employee benefits like insurance have been subtracted from your gross pay. Next, you need to look at how often you receive your paycheck. If you receive one paycheck each month, your monthly income is simply the net amount of that check. If you receive a paycheck twice each month, your net monthly income is the net amount of your check multiplied by two. If you receive a paycheck every other week, you need to multiply the amount of your paycheck by 26 (the number of paychecks you receive in a year) and then divide this amount by 12. Finally, if you receive a paycheck once each week, you need to multiply the amount of your paycheck by 52 and then divide this number by 12.”

“Let’s move now to calculating your net income from variable income sources. Variable income sources include commissions, bonuses, and other sources of income that may vary in amount and frequency. Because of these variations, you need to be cautious with respect to your approach to calculating the amount of net monthly income. If you receive a commission payment every month, you can use either the smallest monthly commission received over the past several months, or you can calculate the average amount received each month. The same is true for bonuses.”

“Financially fit people whose sole source of income is variable find ways to set money aside when they receive it, so they can use it appropriately until they receive their next paycheck. Generally, these people determine their total monthly spending requirements and then use this number as their calculation of the amount of income they need to allocate to monthly spending. This way, they do not spend more than they have allotted, and they will have the appropriate amount of money set aside for future spending requirements.”

Once you have completed your calculations for both fixed and variable income source, add those numbers together.  This total represents your monthly net income.  For more information on calculating your net income from fixed or variable income sources, please read Money for Life, Applied Principle 10.

Join us again soon for Step 2 of creating your spending plan.

Contains excerpts from Applied Principle 9, Money for Life, by Steven B Smith