Definition: The envelope budget target amount is the amount you should have in your envelope at the end of the month to meet all future expenditures within the next 12 months.
Planning and preparing for upcoming expenses, even those that might be months away, is one of the great benefits of envelope budgeting in Banktivity. Within an envelope budget in Banktivity you will often see a “Target” amount below your envelope. This value is the amount you should have in your envelope at the end of the month to make sure you will be able to cover all upcoming expenses in that category based on what you budgeted (the app looks 12 months into the future).
Repeating monthly budgeted amount
This is actually an example of when you won’t see a target amount at all in Banktivity because the monthly requirements don’t change. For example, if you budget for say, Groceries at $500 a month, every month, then Banktivity will not show a target. The reason is, you don’t need to do any special planning now for some expense down the road. You have this expected expense every month for $500 so you should always try to fund that envelope to $500, every month. It doesn’t change. In other words, Banktivity will only show you a target amount, when the amount you should have in your envelope this month, is different than the expected amount.
Budgeting for one expensive month
Let’s say you budget to spend $120 in December in some category. Let’s also assume, you need to have this money on December 1st (the target calculations always assume this as you’ll see as you keep reading). So the budget looks at this and calculates how much money you need to fund your envelopes to have $120 on the very last day of November barring any unforeseen expenses. That way, when December 1st rolls around, you are prepared! On an intuitive level, you might think, OK, I need to save $10 a month to make sure I have $120 for December. This isn’t technically wrong, but it depends on where you start from!
Since December is the last month, let’s start from the first month of the year, January. If we say you need $10 in January, $20 in February and so on, you’ll end up with $110 at the end of November. $10 short to be prepared for the 1st of December! So accurate target amounts will show you need $20 in January, $30 in February and so on. That will get you to have $120 at the end of November. But what will that leave for December? Well, just because you spend your money in December on this item, it doesn’t mean you get to take the whole month off, so Banktivity, correctly calculates that you need your envelope to have $10 in it at the end of December. In other words, you need to sock away $10 in December (and $10 each month thereafter) to make sure when the next December rolls around, you have the $120 set aside.
Here is a breakdown breakdown of the target amounts by month for this example. Again, this is the amount money Banktivity is calculating you to have in the envelope on the last day of the month.
Expense every 6 months (two times a year)
For this example, let’s say you have an insurance bill due every 6 months. Let’s say you need to pay it in March and September and the bill is $600 (so your annual insurance costs are $1200 a year). Let’s also assume that the current month is March and you already paid the $600. Banktivity will show you that you need to have $100 already saved at the end of March to be on track to pay your in September. The chart below also shows that your target amount will go up by $100 every month to make sure you can always afford your insurance bill.
Expenses for 11 months of the year
For this example, let’s say you spend $120 every month, except January. That is a total of $1,320 (11 months x $120) you’ll need over the next year. Now divide that by 12 months and you’ll need to save $110 each month. However, putting aside $110 each month isn’t quite right because it doesn’t factor in paying for the current month and the future requirements. What you really need is an initial contribution to the envelope and then add $110 each month to make sure you continue to always have enough going forward and spread the cost out over 12 months. Remember, the target amount is the amount you should have in the envelope at the end of the month, it won’t always equate to how much you need to contribute since that will also depend on the amount of spending in the category. Here’s a table breaking down this example.