A Year with EveryDollar (part 3): Putting it into practice

In my previous 2 Posts I described 1) My experience using EveryDollar and 2) Some of the Tools I use with it.

In this post, I wanted to cover putting it all together.

  • Not following Dave Ramsey 100%
  • Starting out the New Month
  • The Extra Debt Payment Categories
  • What is Left to Budget
  • Going through the Month
  • Ending / Closing the Month

First off, I’m don’t think I am doing it 100% the way Dave Ramsey intended.

EveryDollar is assigned a Task……

If you listen to Dave Ramsey describe it, he wants you to have your budget 100% allocate, with “Every Dollar” assigned to a Task. (If you are following Daves’ “Baby Steps”, these would be things like:  Paying your Debt Snowball (Step 2), Creating an Emergency Fund (Step 3), Setting Aside 15% of your Income for Retirement (Step 4),  Putting Money Aside for your Kids College (Step 5), Paying off your Mortgage (Step 6)).  The key point is that EVERYTHING is assigned a purpose (or as Dave says “EveryDollar is assigned a name”).

In my case, I will usually leave a lot of the money uncommitted, until the Day before payday.  (The only time I have committed everything is when I knew I would have a very large expenses the coming month).

Getting the Calendar Right….

The 2nd big change from the standard usage involves the start of the month.  My payday is the 25th of the Month.  I tried using EveryDollar with the payday near the end of the month, it just got very difficult to manage and keep straight in my head.  For me I needed to make an adjustment.

So to get it working I basically I split the month based on my Payday (the 25th), so on the 25th of the Month, I switch Everydollar to the NEXT Month. (I’ll go into more detail later).  So far this has worked out for me pretty well. (Between the 25th-1st the GUI and App do need to be manually set, but otherwise it is OK).

Starting out the new Month

(Just to keep is organized, the next Section will cover the End of the month (or closing it out)).

Now that I have been using EveryDollar for a while my setup for the next Month is fairly straight forward:

  • Create the Categories for the Coming Month. (Including Income) 
  • Adjust the Categories for the Variable Expenses in the Coming Month
  • Top up my Virtual Envelopes

Creating the Categories and Amounts for Next Month

When you first start using EveryDollar, it will automatically fill in the Budget Categories based on your inputs into the setup Wizard, in subsequent months, it will ask, if you want to populate the categories with the details from the Previous month,  basically I just this option each time.

Adjust the Categories for the Following Month

Most items are Constant (i.e. Health Insurance, Cable, Cell Service, etc), though in some cases it me be variable:

  • Adjustments
  • Variable / Irregular (i.e Quarterly Expenses)
  • Unexpected Repairs/Copays/Biills
  • Loan Payments (with shifting Payments)
  • The Extra Debt Payment Category
Simple Adjustments

Sometimes it is necessary to adjust the values different categories.  When first starting out you probably will need to adjust the amount allocated for each category, simply goto the category and changed the amount “Planned”.  

Other reasons to do the adjustments are changes in Pay (Hopefully a raise :-)).  or other rates, etc.

Variable Expenses

I have a few expenses which happen quarterly, I usually will usually just put the details in the Category Name:

Waternet (Quarterly 3,6,9,12) 47.16
Heating Warranty (Qyarterkt 1,6,9,12) $42.20

There are a few cases where things will change

Unexpected Repairs/Bill/Copays

When these happen I will usually try and carry them over till after payday, so even though “unexpected” it can be still budgeted.

I will also keep a category for things like Insurance Co-pays and ajust them based on expected expenses. 

Shifting Principle Payments

Finally, I adjust the amount which will be paid for my Debt. In my case this is my Mortgage. If you are doing your Debt Snowball, this will be how much you are allocating towards each of your Debts.

Topping off the Virtual Envelopes

I have 2 Main (Virtual) Envelopes.  (I explain them in more detail in my previous post).

Each Virtual Envelope is a different Category.  For me they are: Groceries and Dinning. (Other people may use these for other things: Gas, Clothes, etc).  

On payday I will look how much is left in each envelope, and top them up.  The part that is exciting for me is that, if I have anything left after toping them off, it goes to my Mortgage. (If you’re doing Debt Snowball, use it for you Debt Snowball). (i.e. the “Extra Debt Payment Category” (not just the category but an immediate payment).

**The Extra Debt Payment Categories**

(I actually have 2 of these, 1 is automatic, the other is manual. This section cover the automatic payment)

I am working on paying of my Mortgage Early.  (As of this writing I am about 6 years ahead of schedule).  Other people may be doing their Debt Snowball and so would use these Category for that.  

The Manual Extra Payment

Anything budgeted but not use for topping off the Virtual Envelope goes into this category.  (Also at the end of the month it gets some attention as well).

If anything unexpected comes in, this (and the accompanying payment) goes into this category.

The Automatic Extra Payment

Basically if I have a permanent decrease (or an increase in income), these extra funds get thrown into this category.   Normally my Mortgage Company will Refactor my payment after each Extra Payment, this means that the payment will go down by a few Euros each month.  (I will add that to the automatic payment).

There are also many other ways to find cash to through into this payment, for example I have:

  • Cancelled my gym membership (€45 / month)
  • When my Cell Contract expired, I found a different provider who was much cheaper.  (I negotiated with the sales person to also get a bundle discount on my cable for 9 months. 
  • Switched Utilities (The sales person was also willing to negotiate, after 12 months we will get a €200 rebate, plus a small €9/ month savings)
  • By making lunch at home the ngiht before, my eating expesnes have gone to maybe €5 a week. (Also though this actually predates EveryDollar, the Free cash that was available, went directly into this payment from day 1).

Since these savings are Zero Sum (i.e. the savings matches the extra going out), I have this come out AUTOMATICALLY the day after pay day. I do not see these funds, so I am not tempted to use them.

What is “Left to Budget”

As you are updating the Categories, at the top EveryDollar will list “$xxx.xx Left to Budget”.  After I filled out all of my categories, I was very surprised to find the “Left to Budget” amount was much larger than I thought. (Listening to people calling into Dave’s show and Dave himself, this seems to be the case for a lot of people).

In theory this money is not committed and can be used for other expenses.  The first few month, the categories will need to be adjusted, so I would recommend leaving it alone before everything is settled.  

I’m not yet confident enough (even after a year) to regulary start the month by throwing all of this against the Mortgage.  (Usually I will have some unexpected insurance co-pay or some other item come up, but this is generally much smaller).  

I once month I had very large extra expenses pending, so I did use all of this amount, but it is not something I regularly do.

I have tried a few strategies to use this against my debt……sometimes as the month goes buy I will throw a fraction of the amount at the mortgage on a weekly basis. (i.e. 1/5 + 1/5 + 1/5……). Mostly it waits until the month ends.

(See the End of the Month below).

Going Through the Month

This is the pretty much the easiest part of using EveryDollar, I attempt to touch my main account as little as possible, the only things that come out of it are either:

  • Known Automatic Payments
    • Cable (15th)
    • Cell Service (21st)
    • Health Insurance (1st)
    • Mortgage (1st)
  • Topping Off the Virtual Envelopes
  • Payments to Sinking Funds
  • Unexpected Expenses
  • Extra Mortagage Payments
    • Automatic (Day after Payday)
    • Manual (Throughout the month).

As these come in I simply enter them as transaction in EveryDollar. Paradoxically I find myself checking account wondering (expectantly) when bills will get charged to my account, so I know that it can be struck from my PENDING amount.

(Also sometimes, when doing the payday bookkeeping, since I know the funds will come out in 1 or 2 days, I will simply pre-enter them).

In the US there is an Extra paid service where EveryDollar will automatically sync these from your bank.

Ending/Closing the Month (Making it an “EveryDollar Budget”)

As I mentioned earlier I am working on retiring my Mortgage, the first day of my pay period is very important  to making and figuring out how much extra will goto the Mortgage, but also so is the LAST day of the pay period. 

Before reconciling what is left over, I’ll usually copy the Budget to Next Month. 

At this point I will usually look at any Categories which still have cash left, usually there are only 1-3 (transportation, fees, copays).  At this point adjust the amount Budgeted to match the amount actually spent.  This free’s up the money and adds it to the “Left to Budget” amount. 

I will then make a payment to “Manual Extra Payment” to get rid of anything that is “Left to Budget”

Once there is “ZERO Left to Budget”, the program considers it an “EveryDollar Budget” because every dollar has been accounted for.

Conclusion

By watching/reconciling each expense, knowing what was happening and making sure everything falls into their Category, I have taken much more control over my finances and have much less worry. 

I’ve also become much more Mindful of my Money and where it is going.

It has also allowed me to throw much more than I though possible at the Mortgage and significantly reduce the expected time left.

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