Howdy. My wife and I budget using a modified envelope system we've constructed through tiller (awesome tool, happy to answer questions about it - not an ad).
We've been using it for over 5 years and were really good / intense about it until kid number 2 started coming along + a million complications (illnesses, deaths in the family, etc...).
We never reset our budget for 2025's change in income plus change in lifestyle with a 2nd child and that's compounded into 2026. Not to mention the typical budget maintenance of over/underspending and managing categories and surprises.
Our modified envelop budget allows us to go negative and roll that negative over netting against each monthly funding amount. Conceptually we have the ability to 'take loans' from ourself which is useful for irregular categories where the annual amount works, but month to month may fluctuate.
We're not in debt, we have sufficient liquidity and cash flow to manage all necessary and discretionary expenses. So there's not a crisis looming, but want to be budgeting more appropriately now that we've got a handle on life with 2 kids.
With 2 years of categories deep in the red, out of alignment with current contracts (e.g. daycare) and/or just not managed ... do we:
A) Work to pay down all our red categories of overspending month by month (this will take considerable time) while updating known contracts/expenses?
or
B) Use our same structure, but start as if today is day 1, updating for new income, liquid cash, and current expenses/contracts but setting all 'internal debts' to 0?
Thanks!