When Kim (from West Chester, Ohio) and her husband first started using Mvelopes, she shared her feelings about the product with us. Kim wrote:
Planning for the Unexpected
Before using Mvelopes, my husband and I had a “plan” that we would use my husband’s income and only spend a certain percentage of my monthly income (which varies from month to month) and the surplus would go into savings. Without fail, month after month, we would end up charging some expenses that always came up on a credit card, and/or having to fall back on our “overdraft protection” (i.e., automatic bank credit card) and would then have to transfer most or all of the month from savings to pay the cards off. With five teenagers in the house, there are ALWAYS unplanned expenses that come up and we could never figure out exactly how to stop the outflow. Because of this, we could never make any headway towards paying off our 2nd mortgage, something we both really wanted to do.
The first month of using Mvelopes was a real eye opener for us as we figured out exactly how to budget to live within the preset monthly income we had already identified. And you know what? That first month we didn’t use the credit card one time, we didn’t fall back on to “overdraft protection” AND we were able to live on the portion of my income we had identified! As a result, we were able to establish an emergency savings fund AND had money left over to apply towards paying off our 2nd mortgage!!
Now, get this . . . last week, the alternator went out on my car and we had to take it in for repairs. The total came to about $420.00. Because we had been steadily funding a car maintenance envelope, we had almost exactly $420 to apply towards this repair! A minimal transfer from one of the other envelopes and no more worrying about “how are we going to pay for THIS now?!” What a relief!
I love Mvelopes and have told all of my friends and family what a great tool it is. Thank you so much!
I contacted Kim to find out more about their Mvelopes’ experience. I had a very enjoyable conversation with Kim and learned a lot from her. Portions of our conversation follow below (I asked the questions and Kim provided the answers):
Q: How long have you been using Mvelopes?
A: About a year and a half, I believe.
Q: How has Mvelopes assisted you in living within your income?
A: First, it has made us more of aware of the expenses that we incurred each month. At the end of each month, we typically had to take money out of savings to cover our expenses. This caused arguments almost every month because we didn’t know where the money was going. We can now see our money dwindling before it’s gone and we can stop the behavior. Within the first month of using Mvelopes, we saw immediate results. We didn’t have to recreate where the money had gone.
Q: How much consumer debt have you been able to eliminate during that time?
A: We never carry much consumer debt and typically pay off the cards we use each month.
Q: How much have you been able to save while using Mvelopes?
A: We’ve been able to save probably $10,000. We have college funds set up for our children, plus we are saving for retirement. However, with regard to simply having a savings account, we’ve saved and then spent. We’ve used some of our savings for vacations. We’ve had to dip into savings for unexpected car expenses (at one point we owned four cars–with three teenage drivers–and one of the cars was a “junker”). We have a wedding coming up next month that we’ve been saving for, and we’ve had other similar expenses that have taken some of our savings.
Q: How much has your average checking account balance increased while using Mvelopes?
A: Prior to using Mvelopes, our average checking account balance was $200-$500. However, every single month we would have a significant amount (in excess of $1,000) in the overdraft. We had to transfer funds from our savings account to cover those expenses. Now we have a positive balance of at least $1,500-$2,000 in our checking account each and every month.
Q: What financial goals have you achieved while using Mvelopes?
A: We’ve been able to save money and pay for our vacations without using credit. We’ve been able to eliminate our dependence on credit cards. One important goal we’ve achieved is that we’ve established 529 accounts (college accounts) for our kids. In fact, we have our daughter’s first three years of college almost completely paid for. Because we don’t carry debt, we are able to live within our means. Also, my pay has been reduced over the years, but we haven’t really had to adjust the way we live. We simply tweak our envelopes just a little bit, and we are able to manage just fine.
Q: What are your next financial goals?
A: I will need to purchase a new car in the future, so our next goal is to be able to pay cash for that car. We plan to continue funding the college accounts for our kids. We do have a second mortgage that we want to get paid off. We were able to completely pay off our second mortgage at one point, but had an unexpected emergency that was pretty significant, so we again owe some money on the second mortgage. We also want to greatly increase our savings.
Q: How many envelopes have you created?
A: We have 69 envelopes. My favorite envelope that I’ve created is a “reimbursement” envelope. We have five teenagers who are constantly borrowing money that needs to be paid back. Each child has a “reimbursement” envelope with his or her name on it. When a child borrows money, the amount borrowed is indicated in a negative red number. We always know how much is owed because the envelope is cleared when we’re paid back. It’s a great system. We have several ministries that we donate money to and I have created separate envelopes for each of them so we can easily track those donations. We have separate “entertainment” envelopes. Under “house,” we have envelopes for home décor, gardening, and cleaning. We have our kids’ allowance, school expenses, and sports expenses. We have a rental property and that has several envelopes. My husband and I run marathons several times a year and there are race and entry fees, running group membership, travel expenses to and from the marathon, along with shoes and other equipment that will be needed for the marathons. We have a “marathons” envelope set up so we can be sure those funds have been set aside.
Q: How has Mvelopes helped to reduce financial stress?
A: For one thing, my husband and I no longer have any disputes at the end of the month. It is really freeing, honestly. It’s freeing to know that you have the opportunity to make choices because you have the information ahead of time. We no longer have to be reactive. Before we found Mvelopes, we were constantly asking: How can we be dipping into our savings account again? We didn’t know where the money was going. We also didn’t have the foresight to say, “Let’s wait until next month.” It wasn’t a matter of whether or not the purchase was appropriate. It was a matter of whether or not right now was the right time to make that purchase. In the past, we paid for things, and then dealt with the consequences later. Now we are able to be proactive and decide when to make purchases and incur expenses.
Q: If married, how has Mvelopes helped you better collaborate with your spouse?
A: The neat thing is that we split the responsibility. I am not disciplined enough to pay the bills on time, but my husband is. And he is not disciplined enough to say, “No, we can’t go out to dinner tonight because we don’t have the money,” but I am. So I completely trust that my husband will pay the bills on time, and he trusts that when I say that we don’t have money for a purchase right now, that we don’t. We share the financial responsibilities and it works very well for us.
Q: What advice would you give to new Mvelopes users?
A: I have recommended Mvelopes to so many people. I think it’s important to make sure that you personalize the envelopes based on your specific criteria. Don’t be afraid to delete envelopes that you don’t use, and create ones that will work for you. I highly recommend the “auto assign to transactions” feature. I use it with a lot of my purchases. For example, transactions with my mortgage company will always go into my mortgage envelope, so I set that up as an “auto assign.” The fewer transactions you have to put your hands on, the easier it is to use.
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: Mvelopes allows you to be proactive rather than reactive. As I mentioned, I have recommended this program to so many friends, for that very reason–especially friends of mine who have recently lost their jobs. It’s a great program.
Kim, I truly enjoyed our conversation. You and your husband are doing a fantastic job managing your finances, and it sounds like you’re also amazing parents! Thank you so much for letting us learn a bit about how you and your family use Mvelopes. I loved the “reimbursement” envelope concept. What a great idea. We wish you continued financial success and much happiness.