Early last month, I started using a service called mvelopes.com. This is a personal finance and budgeting program that you would use instead of MS Money or Quicken. I had tried both Money and Quicken with very mixed results. I found them to be bloated, buggy, and trying to do too much and failing to do it well. So I decided to take the plunge and give mvelopes a try.

Mvelopes is basically an online representation of the envelope budgeting method, where you put cash into envelopes for groceries, spending, medical, gas, etc and then take the cash out when you need to spend it. When it’s gone, it’s gone. This can be a very effective method of budgeting, but it’s 2006, and I don’t want thousands of dollars in cash sitting in my house, not to mention the fact that I only use cash for a tiny percentage of my monthly transaction volume.

Enter Mvelopes.

Basically, Mvelopes works using the exact same concept as cash in envelopes, but online. So you setup a budget and then when your paycheck comes, you divvy it up into the envelopes, which represent budget categories. Mvelopes doesn’t move any money, it just keeps track of how the money in your checking account is allocated. Then, as your transactions come in (automatically downloaded from the 12000 financial institutions they have relationships with), you assign them to the envelopes that they correspond to and they reduce the envelope by that amount.

Perhaps an example will help. Let’s say you get paid $100 and you put that cash in the “Clothing” envelope. The balance of the envelope (assuming it was $0 before) is now $100. You buy a sweater for $25. When that transaction is downloaded from your bank, you just drag it into the clothing envelope and it reduces your balance by $25, to $75.

The service has a ton of other benefits and it takes a little bit to get the hang of everything, but it’s awesome. I highly recommend it.