The best budget system ever!

If you didn’t know already, my husband is a genius. Seriously. Anyone who can keep this chick on a budget has to be a genius.  We have been trying to budget for about 8 years, but it has never worked for me…until now.  We have been on this budget system for about 6 months and it is working beautifully.  Some of my friends and family have asked me to write a blog posting about it, but instead I got the genius himself to compose this posting :), so here goes…

We liked the idea of budgeting with “envelopes”, but never thought it would work for us. First, we didn’t like the idea of carrying around cash all the time. I also wasn’t thrilled of the prospect of carrying around a fanny pack or European Carry-all (“It’s not a purse. It’s European”) so I could hold all of the envelopes and cash. Also, we didn’t think it would work for us because we have two people that spend the shared expenses equally and we do a lot of shopping online.

So after some research and several months of tweaking our system, we have come up with a very easy system that has worked wonders for our budgeting using USAA free checking accounts. Don’t let the name “United Services Automotive Association” fool you – they offer free checking and you don’t have to be military or have an auto insurance account to join! Instead of envelopes, we use debit cards tied to individual checking accounts that represent each of our envelopes. Each account becomes a “virtual envelope.”


Why is this easier for us?

1) The budgeted money moves automatically into each account every month (or pay period if you prefer) – so we don’t even have to go to the bank to stuff each virtual envelope;

2) We can use the debit cards to buy items online directly from the virtual envelope;

3) To check the balance of my accounts I send a text message to USAA with “bal” in the message body, and USAA replies with a text message telling me the balances of all of my “envelopes”snap20110704_093731

4) If there is only $27 in your account and your bill is $29, the transaction will be declined – it won’t allow you to overdraw the account. Just like if you didn’t have enough cash in your envelope;

5) We even earn interest and reward points when we spend money using our cards

So if you want to give it a try, here’s how to set up your budget using USAA:

1. Register all users at USAA

◦ Register each user at USAA. You will each have a separate username and password.

2. Link your user accounts together

◦ Login using one of the user accounts you just set up.

◦ Go to: My Profile | Manage Personal Information

◦ At the bottom, you will see “Family Member Information.” Click on “Add Family Member” and complete the steps to add the second account you created in step 1.

3. Link your primary checking account to USAA

◦ This is the account that will fund your “envelopes”. It is probably the account that your paycheck gets deposited into.

◦ To link your primary account, go to: My Accounts | Add an Account. From there follow the instructions to add your account.

◦ Once your primary account has been linked to USAA and verified, you are ready to open up some USAA checking accounts.

4. Plan your “virtual envelopes”

◦ How many “virtual envelopes” do you need? We created Checking accounts for each of our discretionary spending categories – clothing, dining out, fun money (his, hers, kids), gift giving, vacation. We also created Savings accounts for infrequent expenses: auto insurance, Christmas, etc.

5. Make your “Virtual Envelopes”

◦ Navigate to: Products & Services | Banking | Checking | Open an Account

◦ You are making a joint checking account, so select those options. The options are fairly self explanatory. The Overdraft protection allows you to link your checking account to another account in case you overdraft your checking account. If you are only using your ATM card and never writing checks, there is a little chance of overdrafting.

◦ Repeat for all checking or savings accounts you need.

◦ Tips:

• All accounts don’t have to be joint accounts. Either user can have accounts that are completely separate from the other user’s access and control.

• Make unique starting deposit amounts into each account (i.e. $25 in clothing, $26 in his fun money, $27 in . . . ). It makes it easier to figure out which card is which once they come in.

• Savings accounts earn interest, but they have a limited number of transactions

6. Nickname your accounts

◦ Once your account is created, you need to nickname it so you can identify which account is which

◦ Go to: My Accounts and click on the Account you want to nickname.

◦ Click on the “Change Nickname” link – it isn’t that obvious where it is so here’s a pic . . .

7. clip_image002
[optional] Add Text messaging

◦ This allows you to check all your envelope balances by sending a single text message

◦ Go to My Profile | Text Messaging

◦ Add your cell phone and verify it.

◦ Now choose which accounts you want to receive updates about.

◦ Choose names that make sense because these will be the labels used in the reply text messages

8. Activate and label your ATM cards

◦ If you open several accounts at once, it can be a little tricky figuring out which card goes to which account. Frankly, I don’t remember how I did this.

◦ We used a label maker to make little stickers to put on each card.

9. Transfer funds based on your budget

◦ Go to: My Accounts | Transfers | Transfer Funds

◦ Choose From and To accounts, and whether it will be an automatic transfer or one time and the amount

◦ The automatic transfers allow you to set how often the transfers should occur (weekly, every 2 weeks, 1st and 15th, every month, etc), and the dates they should start and stop

10. Let the budgeting begin!!!!

◦ Use your debit cards like you would use your envelopes

◦ If you want to know your balance before you go to the cashier, send a text message with “bal” to the number that USAA told you during setup. In a few seconds, you’ll get a reply with a list of all the balances of your accounts. This helps you avoid the “I’m sorry, you’re credit card was declined” conversation.

11. Other suggestions

◦ We still use an awards credit card for needs that aren’t really under our control – like medical expenses, gas, health and beauty, etc. That card we labeled “needs” and we pay off the full balance every month.

◦ We also have a credit card for “Reimbursables” and for “Budget Adjustments”. The reimbursables card helps us keep track of expenses that will be reimbursed or paid back. The “Budget Adjustments” is for a transaction that will require an adjustment. For example, if you go to Target, you might have a total bill of $100 made up of some groceries, some his fun money, her fun money, household, etc in a single receipt. Rather than checking out 6 times, we just run it through the Adjustment card. Then at the end of the week, we make the transfers: $25 from groceries, $10 from kids fun, $10 from his fun money, $15 from household, and $40 from her fun money – all of this money goes back into the primary checking account.

Please let us know if you have any questions or comments :)

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10 Responses to The best budget system ever!

  1. Stephanie says:

    Wow, this seems like a great system! Thanks for the detailed explanation!

  2. Amber says:

    Thanks, Zach!! You are the best!

  3. david says:

    thanks for sharing this creative envelope system. I have been using the cash envelope system for about 8 years now and have many envelopes but I like the reimbursables and budget adjustment. I would like to leave the cash system but carrying 7-10 cards seems too much carrying a huge wallet around.

  4. Anne says:

    Just needed to say – we finally started this month. I am SO excited to get it going. Thanks for the tip ;)

  5. Dalice says:

    Not sure if this is still monitored (I know it’s a couple years out!) but I was disappointed to find my family was ineligible for the USAA accounts b/c we have no military affiliation. Is this a recent change or is there a way around it? thanks (:

  6. Debbie says:

    Yes, it is a previous change. I worked at USAA headquarters in the 80s and have done my banking there since then. I recently received a letter from them stating that since I have no military affiliation, if I should ever close all of my accounts, I will not be able to bank there. :-(

  7. Debbie says:

    Sorry….it’s a RECENT change

  8. David says:

    Hello, this sounds like an awesome idea. How has it worked over the past two years for you? Any issues/tips/additional information that you would provide or suggest now that you have been doing it for so long? I am going to share this with my wife and see if she thinks it’s something she would like to try. We have been struggling with budgeting our money, 5 kids and a single income gets to be a chore.

  9. Sejana says:

    Hello I ran across this from a USAA blogpost for a request for digital envelopes. It sounds like a great system if you had access to USAA because of the text feature to give you an instant update of your balance in all of your accounts to avoid the “dreaded conversation” at the checkout line. I also like the possibility that you could receive the declined transaction if you attempt to go over the amount in your account. But, the potential problem that I see is that with any budget, if you still want said item(s) you could use another card to get it and then figure it out later. (Hopefully not though!) Also what seems like a potential pitfall is to have the adjustable card for using at Target (like in your example) to buy everything and then “at the end of the week” go through and move money around online to edit the accounts. Well, if a person has a lack of self control, then they could potentially spend over the amount in their card in a day and worse yet in a week which would leave you back at square one again. There is probably NO budgeting system that will alleviate all these issues so perhaps I would suggest in using any system, any time that money is spent, you MUST reallocate monies immediately after the purchase or at the very latest at the end of the day. For those that like this idea but not having to carry around all the cards, there is a reputable online (and on the phone too) digital envelope system at or use the app “goodbudget.” Good luck!!

  10. Sejana says:

    Also, thank you for sharing your idea with the world. It seems that yes, your husband IS a genuis ;-)

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