It makes sense to me. I channel 100 per month for the winter heating bill, no need to think about that, it's automatically there. I channel 500 per month for petty cash, don't dive into the rest, it's automatically there. I channel 200 per month for annual insurances, no need to think about that, it's automatically there. Etc.
It's a personal direct-debit, like using rules on one's email.
I know a lot of people like to do it that way, otherwise these features wouldn't support an entire new category of fintech startups. For me, this is a mental burden and too much busy work.
What's more useful to me is forecasting. If the app knows how much money I'm going to need (e.g for rent, bills, groceries, insurance, etc) and it knows how much I will probably receive by then, it can show me whether I'm on the right trajectory and how much headroom I have for discretionary spending. My Monzo app does that (somewhat imperfectly).
But if I decide to buy a new computer, I don't want to manually "borrow" money from three different pots and later replenish them manually. I just want to spend the money and have the app tell me the total amount I have to raise in order to stay solvent.
In the computer example, someone using the envelope system would decide not to buy the computer if the balance in the appropriate account was short. It’s just a different approach to timing and limiting purchases.
It still sounds a bit weird to me. If I need something, I will buy it unless I don't have cash for it. The concept of buying stuff just because I still have some spare cash in some bucket but I stop once bucket is empty feels so strange to me, some sort of forced self-check on compulsive buyers. If that's the case, I would rather look for solution in the root cause of such behavior rather than symptoms.
Maybe the motivation for some ordinary folks (that don't really need structured accounting, then it might be great) is different than mine. Or if I would be on a really tight budget combined with having to juggle tons of various mandatory expenses (household, kids, whatnot).
You don't have to buy something once the bucket is full. The idea is just to have the money allocated so it's ready when you need it.
For some things those will be fixed monthly expenses (rent, insurance, mortgage. Others will be variable, like grocery shopping, maybe clothing. And others will be bigger purchases like a computer.
It's just another framework or set of tools for budgeting your money out into the future. YNAB (You Need a Budget) has some decent articles on their blog about the concept. Dave Ramsey might be helpful too if you really want to understand the motivation behind this kind of system.
> It still sounds a bit weird to me. If I need something, I will buy it unless I don't have cash for it.
Yes, and envelopes make it easier for many people to figure out if they have the cash for it. They let you "spend" the money the instant you get it, in a virtual way, even if you don't really need to spend it until later. This way you know that when it comes time to pay rent/mortgage, property tax, etc., you're good.
I think you are right though: I think the envelope idea is primarily targeted at people on a tight budget, where you really are trading off pros and cons of spending relatively small sums of money, and where the usual question is what gets sacrificed if this or that is purchased.
You suggest that in such a situation you'd look at the root cause of such behavior (e.g. compulsive spending). Often, the "root cause" is simply unawareness of spending patterns, and envelope spending is a useful technique for a lot of people. It isn't a crutch to cover up some sort of underlying personality flaw that has a deeper "root cause" -- It is just a way of tracking earmarked spending.
I did my own budgeting in a spreadsheet for awhile, and those big lump purchases were definitely something that's hard to model.
I think it's pretty easy to create a budgeting product for the 90% case but those odd lumpy purchases and split payments are something everyone wants to deal with differently.
For example, my girlfriend and roommates often split purchases by one person buying, and the other person adding an entry on Splitwise.
That Splitwise entry isn't a bank transaction until maybe weeks later when I get a Venmo payment from a roommate covering several Splitwise requests, and for my budget I want to match up the $100 charge at the grocery store with the $50 Splitwise request with the $250 Venmo payment that was only partially for the $50 owed on groceries... not an easy problem to solve in a general way that makes lots of users happy.
> That Splitwise entry isn't a bank transaction until maybe weeks later when I get a Venmo payment from a roommate covering several Splitwise requests, and for my budget I want to match up the $100 charge at the grocery store with the $50 Splitwise request with the $250 Venmo payment that was only partially for the $50 owed on groceries... not an easy problem to solve in a general way that makes lots of users happy.
When you spend $100 at the grocery store you make an entry with $100 subtracted from assets:bank, $50 added to expenses:groceries, and $50 added to assets:receivables.
Once your friend pays you $250 for your outlay, you add them to assets:bank and subtract them from assets:receivables.
It’s a little tedious in a spreadsheet, because each transaction results in at least two new rows, so it can feel redundant, but this is basically double entry accounting that can handle this and many other situations.
Yeah I mean I understand the money flows, but it's so tedious to keep my credit card transactions, splitwise, and venmo open while I'm entering things in the spreadsheet.
A budgeting UI that managed this would be amazing, but I understand other people may not keep track of their money flows this way so it doesn't necessarily surprise me that it's not already built.
It's a personal direct-debit, like using rules on one's email.