Mvelopes: I’m actually excited about budgeting

I just discovered Mvelopes, and I may have finally found what I’m looking for in the area of budgeting and financial management. I’ve tried several times to get in the habit of using Quicken (or more recently, Moneydance) to track spending and keep a budget. My biggest complaints with a system like this are:

1. Quicken and the like are geared toward account management (“What’s my balance?”), not budgeting (“What have I spent on gas in comparison to what I budgeted for gas?”). Sure, there are budgeting features, but they usually involve moving through several steps to run a report, and it’s always after-the-fact. You cross your fingers and run the report, hoping it will show that you didn’t overspend your budget in any categories.
2. Getting transactions into Quicken et al. can be relatively easy or cumbersome depending on what financial institution you’re dealing with. You may be able to connect directly to the bank and pull in the transactions or you might have to go to your bank’s website and download a data file which then has to be imported. It always requires some amount of work (both in importing the data and in “cleaning it up” to remove duplicate transactions, add transactions that were missed, etc.) and you’d better do it often or you’ll have a nice long and daunting backlog of transactions to process.
3. If you spend from multiple sources and need all those sources to track to one budget (for example, we do most of our spending on an American Express Green card, but some purchases and bills that don’t take AmEx come directly from our checking account) you almost might as well forget it. Clever workarounds and extra hand-holding–that’s you holding the software’s hand, which kind of defeats the purpose of using a computer for this–can overcome this hurdle, but it just means even more time and mental strain is required to stay on top of your financial situation.

As I said, I’ve tried several times to make this work, and it fails every time because it takes so much time and energy to maintain–and if I get behind, I’m in for an afternoon of toil and drudgery to get back on track. Obviously the most grown-up thing for me to do would be to just suck it up and stick to it. But it would be better if someone would just read my mind and come up with a system that’s easy to use and addresses my main complaints about Quicken and its ilk.

That’s where Mvelopes comes in. It’s based on the envelope method of budgeting; the paper method of doing this is to get your entire paycheck in cash and then put an amount for each spending category into its own envelope. When you need money for gas, you take cash out of the Gas envelope and go. Mvelopes uses the same principle, but (obviously) with virtual envelopes for your budget categories and online tracking of purchases instead of paper currency.

My Quicken complaints are addressed by Mvelopes very nicely:

1. Mvelopes is focused primarily on budgeting. Its purpose is to give you an accurate, up-to-the-minute picture of how well you’re sticking to your budget. You know you’re low on gas, so you log in and take a quick look at your Gas envelope and see that you’ve spent all your gas money for the month, so you know you have to walk for the rest of the month–or you can re-allocate funds from another category, or even just decide to overspend that category–the point is that you’re informed and you’re making a conscious decision, not just spending at will and assuming it will all work out.
2. All your transactions “automagically” appear in Mvelopes. There’s no data entry or file importing. When you set up your account with Mvelopes you supply usernames and passwords for all your financial institutions, so my educated guess is that Mvelopes logs into your account at the bank’s website and scrapes transaction data from the page. When you log into your Mvelopes account, you get a list of transactions that have posted since your last visit; you just drag each transaction to the appropriate envelope (“$35 on gas at Shell using the American Express card; OK, that gets dragged to the Gas envelope”) and you’re up to date.
3. Multiple sources of spending is not a problem. I can log in and find that 5 transactions have posted to my American Express card account and 2 on my checking account; I drag them each to the appropriate envelope so that the spending is properly tracked, and all transactions on the American Express account are also automatically put into a special envelope that reserves money from the checking account that will be used to pay off the American Express balance at the end of the month. This is ingenious, and it puts a stop to the all-too-easy practice of “spending money twice” (running up a balance on a credit card while also spending all the money in your checking account, so that at the end of the month you have nothing left to pay off your credit card balance).

There are some drawbacks, one being that you have to supply usernames and passwords for your bank and credit card accounts to a third party. I’m OK with this, given that Mvelopes is an established service with a goodvreputation that would get sued into oblivion if it ever compromised customer data. There’s also a monthy fee–about $12 a month depending on whether you choose bi-monthly, quarterly or annual billing–but since it’s a web-based service rather than a standalone piece of software that you buy and own, that’s expected, and to me, worth it for the ease of use and peace of mind.