I began writing a comment on the GSR’s blog post: Ask the Readers: Which Credit Cards Do You Use — and Why?. After a few paragraphs I decided I might as well post my comments here.

I can’t say that I ever got burned with Credit Cards, but when I jumped on the Dave Ramsey wagon I did so with both feet. I drank the Kool-Aid. I got rid of all my credit cards… well, except one, but I never used it.

My main problem with debt could probably be more of an issue with cars. We made some dumb decisions in the earlier years of our marriage that really set us back. I have been married 10 years and if my count is correct we are on vehicles #11 & #12.

I have credit card that I’ve had for years with my local credit Union. It has been about 3-4 years since it has even been used or carried a balance. I suppose I keep it just because it has a lower rate than any other card I’ve seen. I don’t know if I’ll ever use it, but I just haven’t felt the need or desire to cancel it.

I guess when I started actually using credit cards again was after a recommendation from a friend. He was spending thousands of dollars each month on Google Adwords for his internet marketing campaigns. Obviously he was making more than he was spending. He told me that with his American Express Gold card he gets rewards and he can’t remember the last time he paid for an airline ticket.

I got an AMEX Gold to use for all my business expenses. I don’t spend nearly as much in Adwords, but I do have expenses that I have to pay each month. I pay for hosting, domain renewals, advertising, online services, etc. I’ve seen that unless you are really spending a lot, it is not going to make much of a difference. I haven’t gotten any airline tickets, but I have redeemed my points for a few Home Depot gift cards which has helped with some remodeling projects around the house.

With Inzolo I can easily keep track of my spending and make sure I only spend money that I have available. I pay off the balance of the card every month.

After doing this for a year in my business and enjoying the small benefit of the rewards, I finally decided to get an American Express card for personal use. We got the American Express card through Costco because we shop their regularly and my wife always fills up our SUV there. It makes it more convenient in that when you shop at Costco or get gas you only have to get out one card. Plus, we get a higher cash back bonus on our Executive membership and we get cash back on gasoline. You also get a higher cash back for travel and restaurants. So now I pretty much use my American express everywhere and pay off the balance each month. Because I pay off the balance and essentially use it like a debit card tracking every expenditure in Inzolo, I don’t think I overspend as Dave Ramsey often points to those type of studies.

Now I’m not really recommending this for everyone – or anyone really. I’ve become a total nerd when it comes to tracking the budget and I have goals I want to reach. Without such a plan I think credit cards can be a real problem.

About 8 or 9 years ago a couple of my friends got GM cards and told me of their great plan to use it for everything to get great deal on their next card. I did the same thing. Looking back, I know I overspent on that and it got to the point where I couldn’t pay the balance back on it. Once I actually read the terms of the deal and found that I could only use $2000 worth of earnings toward a new car, I could see what a stupid deal it was. $2000 wouldn’t make much of a dent in the purchase of a new car. On top of that I would likely never buy a new car – and if I did, I doubt I would want a GM car. On top of that I’m sure if I were to buy a new car from GM, I could negotiate $2000 off the top of the price anyway.

Live & learn.

Sometimes when friends ask me about Inzolo I will say it is a virtual envelope budget system. Often, the response is, what is and envelope budget?

This concept has been around for probably as long as cash and envelopes have been. Basically, with and envelope budget, when you get a paycheck, you cash it, and divide the money into different labeled envelopes representing spending categories. Then as a bill comes due, or you go to get groceries, you spend money from its assigned envelope. When the money runs out, you’re done spending, or you choose to sacrifice from another envelope. It’s really that simple.

Below is a video from the No Credit Needed blog showing the envelope budget using monopoly money.

Angel writes:

I downloaded ATM cash transactions.   How do I transfer this cash transaction from the Checking account to my  Generic bank account that I have set up as a cash spending account?
And how do I input into envelopes when I spend  cash out of this Generic bank account?

You can track your cash just as any other account, but you will have to do it all manually. First, if you haven’t done so, add a new account. Here is the settings I used to create a cash account:

Now, let’s say you withdrew $100 from your checking account. You would likely see a withdrawal from your checking account if you are downloading transactions via OFX direct connect, or if you are importing transactions from a file. To add that $100 to your cash account, simply click the Add Transaction button:

You would now add a deposit to your Cash account of $100.

Now, you can budget your cash into envelopes as you do you other accounts. Whenever you spend cash, you can simply add addition transactions just as above but your transactions will be withdrawals rather than deposits.

I was checking out my stats and noticed a spike in traffic and registrations yesterday. I couldn’t see where they were coming from though. I went digging and then discovered a posted in the forums of MyTMMO.com.

“marinparents” had some kinds works to say that I would like to share:

I have been looking and looking for a budgeting program that is reasonably priced, follows the DR plan, is EASY to use, and has help available for questions. I FINALLY FOUND IT!

3 years ago I started our first budget with paper & pencil (and a lot of erasers.) That worked great, but I got tired of adding up the numbers on the calculator, so I moved to a spreadsheet on the computer. This worked out so much better, but I found that it was still taking up too much of my time making one entry in the budget & making one entry in the check register for every transaction. I thought there must be a simpler way to do this budgeting stuff, so I started doing some research on this forum and the internet.

After all of my research, I decided to go with Inzolo. I am so glad I did! This budgeting program is very easy to use, is only $30 per year (you can also go with the FREE version,) has great customer service, and follows the DR plan. In fact, it is so close to the DR plan, I’d almost think he came up with it! It wasn’t DR though, it was Dustin, a fellow TMMO member.

Thank you Dustin for coming up with this program. I love it and it has made my life so much easier when it comes to budgeting. I have one for my personal budget and one for my business budget and I couldn’t be happier.

If you are looking for a budgeting program that really works, you’ll want to check out Inzolo!

While I was searching to forum I found a few other shout outs. One other I would like to share, “morgensmummy” said:

I recently started using virtual envelopes. I have taken all of our monthly bills and broken them up into how much I need to put in my “envelope” each week. I have started using inzolo.com for this. For whatever reason that site has helped me “see” where my money is going easier. I have a savings account for our BEF but then everything else for my “envelopes” stays in the checking account.

ETA: inzolo does cost a bit for their Pro, but they have a basic that is free.

Thank you for the kind words!

I got the following email from an Inzolo user. I thought it might be good to respond publicly:

[A competing envelope budget tool] transfer monies to a credit card envelope from a specific envelope category once a credit card transaction has been made. Then you know you have the money set aside to pay the credit card.

How does this work for Inzolo?

I’m familiar with how [this competing envelope budget tool] handles credit card transactions. I always found it overly complicated and confusing. I don’t think you need the special envelope. If you allocate the money you have received and only spend what you have allocated to your envelopes, it doesn’t matter if you spend it using your credit card or debit card.

For example, say you have $1000 in your checking account. Of that you allocate $100 to gasoline and $300 to Groceries. We’ll say the other $600 is allocated elsewhere. Say you go to Costco and use an American Express card to purchase $50 in gas and $200 in groceries. That leaves you with $50 in your gasoline budget and $100 in your grocery budget. Your envelope total is now $750. Your checking account balance is still at $1000 and your AMEX account balance is now at -$250. When it comes time to pay your credit card bill you just pay it. I personally have an envelope for AMEX which I use simply to put my transaction records. When I pay my bill, I get two transactions: 1) -$250 from my checking account and 2) +$250 in my AMEX account. I put those both in my AMEX envelope and it balances out to zero. My envelopt total remains at $750 and my AMEX account is back to zero.

From the Desk of Dustin Davis

I thought I would turn over a new leaf in 2010 by offering monthly newsletters to keep you up to date on changes and feature updates to Inzolo. Generally I post updates on the blog, but I know you don’t all have time to visit the blog, so I will summarize in each newsletter.

I will also let you know of upcoming features to Inzolo so you can get an idea of what’s to come.

Here are the updates made to the site in January:

• Added a report to show total of monthly goals. Also added totals of columns on the allocation screen.
• Fixed bug when ofx & qif transaction import files had trailing spaces after transaction amounts
• Started on the creation of an API. This will enable the creation of mobile apps and other tools for creative users.
• Fixed the look of error pages. Yeah, sometimes things go wrong. We might as well look good when we fail
• Modified scripts on the allocation screen to better handle Javascript floating point number issues.
• I created a view to show all past transactions. There is not a link on the site to this page because it needs to be enhanced and cleaned up. I threw it up quickly because I needed it to prepare my taxes.

Video Tip of the Month

There are a number of undocumented features in Inzolo that I have created for my personal use. Perhaps you have happened upon some of them. In this area of the newsletter I will be sharing them with you each month, but for now, let’s start with the basics.

I notice that a number of people join but then don’t actually set up a bank account and import their transactions. This video will show you how to get started. I decided to only show how to start using manual transaction uploads as I’m finding many banks and credit unions don’t support OFX direct connect.

If there is an aspect of the site that you would like to see featured on video tip of the month, please contact us.

Inzolo support importing transactions via Quicken (QIF) and Microsoft Money (OFX) formatted files. I generally recommend using OFX because OFX files have a unique ID associated with each transaction. This allows me to ignore re-importing transactions you have purposefully deleted.

What if you don’t want to ignore previously deleted transactions? Well, now you have that choice. I have added an option to the import transaction view that allows you to re-import previously deleted transactions.

I was listening to yesterday’s podcast of the Dave Ramsey show and Dave’s team asked on twitter for some Horror movies titles related to Dave Ramsey and the credit card industry. The responses he read were great. So here they are:

• Ramsey Scissorhands
• Tennessee Credit Card Massacre
• Debt Man Walking
• Fico The 13th
• Evil Debt
• Sixth Cents: I See Debt People
• I Know What You Charged Last Summer
• Bankruptcy The 13th
• The Last Foreclosed House On The Left
• Invasion Of The Money Snatchers
• Children Of The Card
• Debt Cemetery
• The O Men
• The Kids Think They’re Next
• Foreclosure On Elm Street
• Rosemary’s Baby Steps
• The American Expressorist
• The Night Of The Living Debt

Which one is your favorite?

I pay $12.50 every month for identity theft insurance. Some may say it is crazy, but I have my reasons:

1. It makes my wife relax. Sometimes my wife can be overly paranoid. This is one item she worries about. For this fact alone it is worth paying $12.50 per month just to help her relax!
2. I hate talking on the phone. I know know that if my identity was stolen, by law I would not be liable for any of the financial charges. That is not why I have the insurance. In the case that it is stolen (heaven forbid), I don’t have to spend the time cleaning up the mess. Someone with experience in that area will do it for me.
3. Time is my most valuable asset. I have heard that it could take hundreds of hours of work to clear things up after an incident of identity theft. Honestly, I don’t know how long it does take, but whatever time it takes, it is definitely not where I would want to spend my time. I would rather spend it with my family and working, and my normal daily routines. I don’t want a thief to take that away from me.
4. I’m not overly cautious. I surf the net a lot. I use my real name on the internet. I don’t shred every credit card offer that comes in my mailbox. I don’t like being paranoid. Having this insurance allows me to relax a bit too.
5. It fits in the budget. Really it is only $12.50 to cover my family of 5. That’s $2.50 per person per month. We budget for it each month and it’s not a problem.

That’s about it. I know identity theft insurance is not for everyone. You are certainly fine without it. You can be caution about what you do and monitor your credit to prevent identity theft. You can spend the time to clear up your good name in the event of an incident. I just chose to let someone else handle that stuff for my family.

Now let me preface this by saying I am a huge fan of Dave Ramsey and I see the wisdom in all of his teachings. Now that said, I readily admit I don’t follow everything he says. One area in which I don’t follow along is with the cash envelope budget system.

I think the system is excellent. I do believe it “hurts” more to spend cash. It is hard for me to break a $20. I like that fact that when I spend cash I usually end up with change that becomes savings because I never spend change (I don’t know that Dave ever mentions that one, but it is a nice bonus).

My wife and I tried the cash envelope system. We gave up after only two months. Here are the reasons why:

1. Inconvenience. Let’s face it, debit cards make life so much more convenient. It is not convenient to got to the bank or ATM once or twice a month to allocate cash in your envelopes. I hate waiting in line at the bank so I avoid it at all costs.
2. Inconvenience. Yeah, same reason, but different. It is inconvenient to pay with cash. Grocery stores are not so bad really – unless you use the self-checkout, which I often do – again, because there is usually no lines there. Putting cash in those machines is downright painful. And really, who pays for gasoline with cash anymore?
3. Location of the envelope. It’s happened on more than one occasion that my wife is making dinner and finds she is missing an ingredient. So what does she do? She calls me and asks that I pick it up on the way home from work. If I don’t have enough blow money in my wallet I reach for the debit card.
4. Have you ever reached the checkout and when it is time to pay you realize you don’t have your wallet. That is really mortifying to me. I’m frantic in that case. I start looking through my car for a hidden $100 bill (it’s never there) or a blank check (never there either). Even if I only live 3 blocks away it is inconvenient and super embarrassing. If you forget your envelope and you don’t realize it before you get in line to checkout, are you really going to go home and get it? Not me, I’ll pull out the debit card again. Of course my intention is to go back to the bank and deposit the amount of cash I spent, but I don’t because that is so… inconvenient!
5. While it “hurts” me to spend cash, it seems to have the opposite effect on my wife. If money talks, all it ever says to my wife is “goodbye”. I’m not being rude here. She readily admits this. It’s not more difficult for my dear wife to spend cash than it is to spend money in any other way. Basically, it is just more (there it is again) inconvenient.

Let’s face it. I love debit cards. What I like about them is that if you use your debit card as a debit card (as opposed to credit card) it withdraws the cash out of your account immediately. Your bank account balance is updated immediately (at least where I bank it is).

Here are some more things I love about my debit card:

1. It is free to use. I have a free checking account. I don’t have to pay for new checks as long as I use my debit card.
2. My bank let’s me customize it. I generally put pictures of my kids on it so people can tell me how cute they are. I sometimes wonder though if my bank would be opposed to me scanning in my drivers license so people don’t have to ask for it when I use my debit card in place of a credit card.
3. It’s thin. With all that cash, your wallet can become a pain in the butt – literally.
4. It doubles as a credit card. For those places that don’t accept debit cards but can take credit cards, my debit card works fine. I generally have to wait a day or two for the transaction to appear on my bank statement though.
5. Did I mention it is convenient?

So, how do we make use of the timeless & effective envelope budget system with debit cards? We use Inzolo.

Whenever I get income, be it a paycheck or any other form of income, I decide where we are going to spend that money and allocate it to a virtual envelope.

Whenever we spend money using our debit card, the transaction imported lightning fast into Inzolo and I specify what envelope that money came out of. I can visually see all my envelope balances. If I go over in an envelope I can easily move the exact amount I need to cover the difference from another envelope.

It’s basically like haveing dozens of savings accounts set up in your bank and deciding where each transaction will come out of. I can even split transactions so that different portions come out of different envelopes.

So if you love the idea of the cash envelope system, but don’t feel you have the will power to stick to it, I urge you to give Inzolo a try.