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Sinking Funds And Envelope Budgeting

So this evening I was browsing around the web. I was searching out some blogs and sites about debt reduction. While I am committed to the Dave Ramsey plan at this time, I like to read alternatives just to make sure that I’m not missing some detail. Also I enjoy seeing the progress of others and get ideas to move my situation forward.

One of the core principles of getting out of debt is getting a handle on your money. This includes budgeting and sinking funds. A classic way to do these tasks is by using envelope budgeting for spending and saving. I maintain an ING account for my emergency fund and sinking funds. I don’t like to keep too many individual accounts going. I don’t want to transfer money from one to another and add that level of maintenance to the plan. After all, it’s so simply laid out why over complicate the thing? So I worked out a series of tags within MoneyDance to keep track of what portion of the account is what.

Tonight I came across the It’s Your Money blog. There is a spreadsheet there for envelope budgeting. I’ve seen similar items before but nothing that was either free or worked the way that I wanted it to. This sheet is different and I think it will hit the spot. It does not tie in directly to my finance software which is a slight negative. Yet the way it works that will not hinder me.

The sheet allows for up to 25 ‘envelopes’ per account. You enter the names of the categories and fill in the total for that category. Then as you spend down the money you remove the funds from the appropriate category. The balance total remains consistent with what is in that particular account but you can see exactly what remains in each category within the master account.

The sheet can be duplicated within the same file to maintain different master accounts. So the spending money account can be on one tab and sinking fund account in another. So it’s just one more file to maintain and work in. I can’t wait to see how this works over the long haul.