If you visit personal finance websites (see our top 50 favorite personal finance sites) chances are you’ve come across the term “envelope system.” This is a popular way to help people who want to reduce their debt or simply get a handle on their spending. In its purest form, you take your paycheck, cash it, and divide your cash into envelopes according to budget categories. For example you would have an envelope for bills, food, eating out, gas, and so on.  When spending in any of your envelope categories, you turn to the envelope and draw out the cash you need to cover your expenses. If you find your envelope empty before your next pay period, you then would not be able to spend any more in that budget category and you would NOT borrow money from any of the other envelopes. What this system does is force you to stay within your budget by category and hence stay within your overall budget. It makes you think about spending because you actually handing over hard earned cash so in theory you should think twice about your spending.

Of course, it’s hard to pay bills in cash without having to visit the payment offices of your gas, water, sewer, electric companies, and sometimes these aren’t even local to where  you live. They also may not accept cash payments in the mail, and besides, it certainly isn’t wise to mail a lot of cash in an envelope. Thus, it’s highly likely that the majority of people who rely on the envelope system pay their bills online through an ACH transfer out of a bank account, or with a debit card or credit card account number. They only use the envelope system for food, eating out, and other purchases that you would make at a cash register in a store.

Here’s the biggest problem we see with the cash envelope system. It’s risky to carry a lot of cash. If you cash your paycheck at a check cashing service, you will pay a check cashing fee (versus paying no fee for direct deposit to a bank account or prepaid card account).  You might get robbed walking away from a check cashing place or at any point on the way home. Your cash stash might get stolen by anyone who discovers it in your home.

Finally, some personal finance gurus argue that using cash actually makes you spend more. If you have three twenties in your pocket, a $5 ice cream cone is in easy reach as a spontaneous purchase, but you may resist that cone if you thought about putting it on a credit card or prepaid card, just because it’s a small purchase put on plastic, and some merchants frown on that due to the swipe fees they pay.

Virtual Envelope System

Now imagine that you are using some budgeting software. Today there are many to choose from, or you can even set one up yourself in a simple spreadsheet. You set your budget categories in your electronic budget system. Your starting point might be historical spending going back a year or six months. It’s easy nowadays to download your transaction history from your checking accounts, credit card accounts, and/or debit card accounts. Then import that transaction history into your spreadsheet or budget software. Budget software can even show you your spending categories in a nice pie chart view, or  a table that may help you recognize patterns such as overspending immediately after payday.

Next, like the real envelope system, you divide your savings balance among your different categories. Then—and here’s the harder part with this digital system—you have to have the discipline to not go over your spending limit in each budget category or “virtual envelope.” How do you do this? By checking your budget spreadsheet each time you go out the door, so you know where you are for that category. Say, your “monthly MP3 budget” is $10 and you see that you’ve spent $10 last night downloading ten songs on iTunes, then you can’t buy any more MP3s until next month.

How debit cards make this easy is that you rely on them for all your spending. Avoid your credit cards (because you are likely trying to pay them down). Then, when you download your transaction history, all of that data will flow into your various spending categories automatically.

With a debit card you might lose it or get robbed but your money can remain safe. You have eliminated the risk of carrying cash. You will hopefully think twice about using your plastic for small spontaneous purchases.

With either system, you should soon learn the fine art of budgeting and be on your way to financial well being.

The first step in reducing monthly expenses is to look at the last three months of your expenses and break it out into categories of spending. You can now use a number of budget tracking websites to help you do this very easily, such as Mint, Wesabe, and JustThrive. These sites let you import financial data from your bank accounts to make things easy.

Next, figure out your main budget categories and where you can cut back spending in each of them.

Cut Necessary Spending You Can Micromanage

The easiest category to chip away at is necessary spending that you control on a purchase by purchase basis. Think grocery shopping. You can easily swap an expensive item (steak) for a cheaper item (ground beef), or cut out items all together (ice cream).  The same thing goes for clothing purchases. To some extent, switching retail environments can help here. For instance, shop at Old Navy instead of the Gap, or for serious saving, shop at garage sales and used clothing stores. Shop at outlet malls instead of trendy malls.

If you commute, consider alternatives, like biking to work, or ride sharing. Or even telecommuting.

Cut Contracted Spending

What is harder is to cut are budget areas where you have contracts in place, like child care, lawn care, phone, cable, etc. Some contracted spending you have to have, like utility bills. The way to cut these, as you no doubt know, is to try and use less energy. Replace light bulbs with more efficient compact fluorescents. Turn of lights when leaving rooms. Wash clothes with cold water instead of hot. Turn down the thermostat. And so on.

Some contracts you can reduce. For example, you can reduce the number of channels you get on a cable or satellite dish to bring down that monthly bill. If you use a lawn care service, or other types of services, ask if there is a lower service level. Maybe you are at the Gold standard level where Bronze will do.  You can also eliminate some contracts all together, like TV and lawn service. Some you may not be able to eliminate, like child care.

One trick is to pay contracted or monthly bills more frequently. You might not save money, but you are less likely to miss a bill payment altogether or bounce a check (which can cost you money). On something like car insurance, where odds are you break up a sixth month bill into monthly bills, you are paying a convenience fee or interest. If you can pay the whole bill in one lump, you will save on those fees.  Finally, it is also possible to negotiate a lower rate all together. Or switch to a new provider with a lower rate. Often, when it comes down to the wire and you threaten to leave a provider to get a lower rate, your current provider manages to find a lower price for you, either by just cutting the price, or adjusting what you get for what you pay.

Find out if you save money by bundling some services such as phone, cable, and Internet. Or car insurance and home owners or renters insurance.

Cut Purely Discretionary Spending

You might be surprised to see when you break out your spending how much of it goes towards Wants instead of Needs.  A want is anything you can live without–and don’t say “I can’t live without my $5 Starbucks Grande Frappucinno every day.  One way to reduce discretionary spending is to simply keep less cash in your wallet. Or avoid whipping out your credit card for spontaneous purchases.

If you really need that vacation this summer–and who doesn’t–plan ahead for ways you can have fun that don’t cost a lot of money. Hike instead of renting expensive equipment like jet skis. Buy snacks or even meals at the grocery store instead eating every meal at restaurants. Or choose a destination where you can stay with friends or family instead of a hotel.

Cut out Savings…Not

We don’t recommend this. In fact, if you make cuts in all other areas and you aren’t saving for your retirement, or school, or other worthy and important goals, shift some of your budget cutting saving into actual savings.

If you haven’t filed your taxes yet, it’s not too late to file for an extension.

Redeeming Riches has a good post on how to file for extension.

If you do not request an extension of the IRS tax deadline and you file late, you will be hit with a Failure to File Penalty of 5% per month (up to 25%) on any unpaid taxes.

Gen X Finance notes the many free ways you have for getting tax advice, including calling the IRS help line at 1-800-829-1040. Believe it or not the IRS wants to help you.

And over at Wise Bread they can show you how waiting this long to file may have paid off if you take advantage of these helpful tips.

We follow many personal finance blogs for their great tips on saving money, getting out of debt, understanding your banking options, and generally improving your personal finances and happiness. We like these blogs for their steady stream of good ideas and down to earth tone. MiCash was founded to provide the unbanked and underbanked financial tools to help them meet their money management challenges.

If your blog is listed here, please feel free to right click on either of the badges above to add to your website with a link to this page: http://www.micash.net/personalfinance/micash-50-faves/

Here then, in alphabetical order are our 2010 “50 Faves.”   Blog names are hyperlinked to each site followed by the Twitter handle in Twitter’s format: @twitterhandle.

20 Something Finance @ge_miller
Focused as the name says on people in their 20s.

20s Money @kevinduffey
Another blog for the Twentysomething crowd, with advice on how to make money as a blogger.

Almost Frugal @AlmostFrugal
This group blog with the cute squirrel logo brings together the voices of four women as they talk about frugality and saving money for their families.

Bargain Babe @bargainbabe
Daily tips for savvy spenders.

Being Frugal @Lynnae
How to live frugally from a Christian wife and mother trying to get out of debt.

Blogging Away Debt
This blog switched hands after the original blogger paid off her debt.

Budgets Are Sexy @budgetsaresexy
Great advice for setting budgets and sticking to them on your way to becoming a millionaire.

Cash Money Life
Cash Money Life is a personal finance blog with an emphasis on saving money for small businesses.

Centsable Momma @centsablemomma
A frugal mom who can point you to coupons and other deals.

Consumerist @consumerist
An excellent group blog and one of the largest personal finance and consumer advice blogs by any measure.

The Coupon Queen @consumerqueen
Looking for deals and free stuff.

Dealicious Mom @dealiciousmom
This mom regularly finds you coupons and other deals

Deal Seeking Mom @dealseekingmom
You want deals? Follow this mom.

The Digerati Life @digeratilife
An engineer in the Silicon Valley blogs about personal finance and her life.

Debt Kid @debtkid
The “kid” has a great personal story of how he is paying off a personal debt and growing a business. Great tips for digging your way out of the debt hole.

DINKS Finance @dinks_finance
A multiblogger site going through a change of ownership, but still relevant.

Enemy of Debt @EnemyofDebt
Brad Chaffee shows his readers how personal responsibility and fiscal discipline relates to debt reduction.

Eliminate the Muda @leanlifecoach
Business background gets applied to helping you save money.

Fabulously Broke in the City @brokeinthecity
This 20-something gal living in the city can show you how she got out of debt and stays debt free.

Faithful Provisions @faithfulprovisions
This Christian blogger looks at saving money from the perspective of stewardship.

Finance Your Life @doctor_s
A young man’s everyday struggle with everything related to the almighty dollar.

Financial Highway @moneyhighway
Toronto based blogger with a background in finance.

Fiscal Geek @fiscalgeek
Dave Ramsey enthusiast and self professed geek.

For the Mommas @4themommas
Deals and coupons. What a value!

Free Money Finance @FMFblog
A free and simple discussion on money and finance from someone who paid off their mortgage and is living debt free.

Frugal Babe @JennFowler
Offering money saving tips and advice on how to live frugally, from a suburban “babe”’s perspective.

Frugal Upstate
Tips, Tricks and Techniques for living the good life on a budget

Gather Little By Little
A group personal finance blog from a Christian perspective.

Generation X Finance @JeremyVoh
The Gen X’ers need to budget and live frugally too. Jeremy Vohwinkle blogs here as well as writes on finance for About.com.

Get Out of Debt Guy @getoutofdebtguy
Answers questions about how to get out of debt and provides articles and videos.

Get Rich Slowly @GRSblog
Popular group blog on personal finance.

Green Panda TreeHouse @green_panda
Personal finance for college students and the young at heart

The Incidental Economist @incidentalecon
Economics, Health Policy, Law, Life: Musings of Curious Minds

Lazy Man and Money @lazymanandmoney
Irreverent and insightful look at topics such as: banking, budgeting, career, credit, debt, entrepreneurship, investing, taxes, real estate, insurance, spending, retirement, and estate planning.

Len Penzo @LenPenzo
Len Penzo does some nice roundups of personal finance blog posts from other bloggers. He also offers some nice tip, tricks, and personal advice.

Living Almost Large @livingalmost
A breath of fresh air about trying to live within your means.

Man Vs. Debt @ManVsDebt
Adam Baker’s popular blog about his life trying to pay down debt and be a dad and husband.

Mighty Bargain Hunter @mbhunter
Hunting bargains for you and me.

Money Crashers @moneycrashers
This blog seeks to develop a community of people who are trying to make financially sound decisions.

Money Ning @moneyning
Former IT pro David Ning now blogs on money.

Money Saving Mom @crystalpaine
This upbeat and encouraging blog will help you find great deals, print coupons, stretch your hard-earned dollars, and live on less than you make so you can save more and give more.

Money Under 30
SmartMoney Magazine writer David Weliver blogs about personal finance issues to help those under 30 start managing their wealth early.

Northern Cheapskate @ncheapskate
Frugal advice from the Great White North

Personal Finance Advice
This group blog offers straightforward, regular personal finance advice

Personal Finance Firewall
This newly minted college grad and IT professional is a life hacker with an interest in personal finance.

Simple Dollar @trenttsd
Another blogger with a story to tell of financial meltdown and then recovery.

Squawk Fox @squawkfox
Frugal living that is sexy and fun

Sweating the Big Stuff @DanielPacker
Budgeting advice, tax tips, and personal finance issues from the perspective of a twentysomething.

Wealth Pilgrim @nealfrankle
Offers relevant money management advice, financial stress management, and plans and resources for addiction to spending recovery.

Wise Bread
The 100-gorilla of personal finance blogs, but a good one.

ChexSystems is a credit reporting agency that has been in existence for many years.  ChexSystems offers data to banks (and gathers data from banks) on how a consumer has handled deposit accounts at banking institutions. The company today is managed by eFunds Corporation, a publicly traded company.

Unless you work at a bank or have been denied opening a bank account, you probably haven’t heard of ChexSystems. As a service to help banks limit their exposure to fraud and credit risk, ChexSystems maintains a list of individuals whose previous bank accounts have been “closed-for-cause.” These causes range from outright fraud, such as writing bad checks, to other causes that present a credit risk or potential for fraud. ChexSystem reports on such risk factors as:

• Account holders who report lost or stolen checks and have closed their account for this reason.

• Account holders who have had extended negative balances.

• The number of times a consumer has applied to open a bank account in the past 90 days.

These are flags for the potential for fraudulent activities such as opening and closing accounts for the purposes of writing bad checks. Some analysts also suggest that banks might use the list to weed out unprofitable banking customers such as individuals who keep low balances (which are less profitable for the bank.)

To be sure, Chexsystem helps banks combat the problem of fraud. However, innocent individuals who have not committed fraud, and may have only been guilty of inadvertently bouncing a check, or having a few overdrafts in a short period of time, can wind up essentially “blacklisted” from being able to open a bank account because they are on the ChexSystems list.

Banks decide based on their own policies and procedures when to close an individual’s account and report that fact to ChexSystems.

So, if you are having trouble getting a checking account, you do have alternatives.

It is okay to splurge every once in a while. After all, life would not be very enjoyable if we could not let ourselves loose every once in a while. We also need some form of reward for all the hard work we have been throwing ourselves into. We have pointed out some time before that splurging is very different from overspending. If you find yourself compulsively shopping more often, buying something not because there is a need but simply for the sake of buying it, than you had better watch out especially if you use a credit card as your main payment option. Excessive overspending can lead to credit debt. And as we always say, credit debt is a nasty trap we do not want to get ourselves pulled into.

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Photo by kirstiecat

It’s only the start of spring, and already people are looking at matters meant for the fall. That’s when a new semester of college starts anew, and when people start thinking about how they’re going to pay for it. An estimated 70% of all students in the United States are able to study in college thanks to various grants, student loans and scholarships. These people end up becoming the future workforce of the nation, and some rise to become captains of industry.

Yet, the future is not always bright for these students. The average cost of a college education for public colleges is about $4,081 annually. For students who enroll in private schools, the figure is steeper: $18,273 a year is what students need to pay.

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photo by Markies

Yes, it may sound strange, but we know there are some people who have never tried shopping online. This is in the face of numbers from the United States Census Bureau from 2008 indicating how e-commerce accounted for $93,280,000,000 of all total retail done in America, equating to around 2.5% of all major sales transactions. There are also figures from Nielsen that estimate that over 875 million shoppers worldwide go online, and that number is pegged to rise sharply in the future.

This rise in popularity is owed to the benefits that shopping online provides people with, especially those who are looking for very specific kinds of items or gifts. Yet there are still thousands who have not engaged in online shopping, and they have their reasons. Identity theft, money security and credit card fraud all come to mind when discussing the perils of buying online. This doesn’t include worries over shipping and product damage, or items that no longer suit their owners, such as clothes or shoes with sizes that don’t fit.

Never bought anything online? Here are a few points for people to remember:

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Once you have stepped into the stage of adulthood, life becomes much less carefree. Your responsibilities tend to multiply and you realize just how much the people around you depend on you and your capabilities. It is when you come to the point of starting your own family that is the best time to think about getting life insurance. More than a guaranteed pay-out option for unfortunate events, a life insurance plan is a good investment that makes sure you and your family can have a financially stable future no matter what happens.

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The cold winter months are finally over and its time to celebrate. For schools and universities across the country, the arrival of spring means it’s almost time for one of the most highly anticipated events in a college student’s life: Spring Break.

Before you spring for that all-inclusive hotel package or special Spring Break travel deal, plan ahead and look around at your options. One of the biggest party poopers is learning too late that you spent too much on a vacation that wasn’t worth the splurge. It takes a lot of diligence and discipline to save up your money. A post-break hangover is fine, but coming home flat broke is another matter entirely.

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