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This weekend I visited my mom in Pennsylvania and went to my aunt and uncle's 50th wedding anniversary. (They were soooo cute!) As my mom and I were talking yesterday, I mentioned that my husband and I take out a set amount of cash at the bank every two weeks, and then try to spend only cash for our everyday expenses. I was pretty shocked when my mom said she had never even thought of using a cash budget. (WOW!)
Our cash budget includes groceries, eating out, and any other miscellaneous expenses that might pop up over the two week period. I'll be honest, we are far from perfect at keeping up with it, and if we do need more money than what's in our envelope we occasionally use our debit card in addition to that cash. (We have a little bit of extra money in our checking account allotted for extra expenses.) However, we have a plan in place that tells us what we should be spending, and aim to spend only that in the course of two weeks.
While we are big Dave Ramsey fans, and have all of our income budgeted into tons of different accounts (including clothing, gas, vacation, car repair, gifts, etc.), we really only take cash out for groceries, restaurants, and any other quick purchases that pop up (i.e., kids school expenses). I've tried to convince my husband several times to also take out cash at least for gifts and clothing, but for some reason we've just never gotten that far. (Although I think it is fantastic if you do budget those in cash as well!)
If you're not living on a basic cash budget now, I highly encourage you to take a few minutes this week to sit down and make a budget to plan where you're going financially. While saving money using coupons can completely change your family's budget, it's so important to have a plan in place to really determine how your money is going to be spent each month, no matter how small or big your family's income is.
Do you use a cash budget and have you found a difference in your spending because of it? Or, are you struggling with starting one and trying to determine where to begin! Today's a great day to start. . . and begin the month of June with a budget in place!
If you're looking for where to start, I highly recommend reading Dave Ramsey's Financial Peace, and you can also download free budget spreadsheets from Dave Ramsey.
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At Randi above, you really can go to an all cash budget, and not a hybrid one “like gas and meds only” without having to give away the flexibility of using a card. What I do for gas is use giftcards, and for meds well I guess im not old enough to be worrying about that yet but perhaps a credit card would be best suited for that, followed by an immediate online payment. Gas prices are what they are, and you cant change it without driving less, so theres not too much control over that in a budget. I just acquire giftcards the same as groceries, and treat it no different. This would go to a completely different discussion, but you can save money by going to giftcards as well. Gas right now is marked $3.16/gal on the road, but I get instant savings with my giftcards and my effective rate is $2.94/gal ; not bad for all cash, all giftcard budget.
I went all cash after receiving my first ever “bank fee” after paying off a large debt and going under the minimum daily bank limit. I was angry since I always thought it was monthly average; not some suckerpunch method like daily balance. The daily limit is $250, and I have $251 that I just keep on the account so that I can cash checks, and pay online bills and make online investments. Being angry at them, and begruging them interest on my surplus monies each month, I now use envelopes for my bills. The bank debit card is in the drawer, and is not used; I carry credit cards, but am more hesitant about using them than I ever was with my bank card.The envelopes are clearly marked, and I even have one for “annuals” for my car tag and car insurance premiums and budget it out over the year. Every envelope has a dollar amount goal, and going all cash allows me to more easily visualize where im at, and budget appropriately at a whim. Its very intuitive as you just write on the envelope to document your cash flow-not much more required than that. Every other paycheck I deposit what is needed for online billing and gone within 3-4 business days for bills, and the rest goes either in my wallet or in the envelopes. It definately makes me question what I am buying, and whether I really need to buy that since it would take a good portion of what is in my wallet for the week! I am finding that impulse buys are taking a back seat to effective budgeting.
Tonya H. says
When reviewing my financial goals for 2013, I committed to using the cash budget. I am really looking forward to seeing how much money I can save as a result.
We do! We use our debit cards only for gas and medical expenses – all the rest is cash! We started about 18 months ago and it has saved us TONS!
That’s awesome Randi ~ great job!!! 🙂 (I’d really like to switch to all cash for the rest…. I gotta get my hubby on board with that one!)
Jessica P says
We are also huge Dave Ramsey fans aslo. We are on a cash budget. Every pay period we take all the cash out we need for our expenses (except those we pay online or are automatically deducted from our bank account like our house note). Doing a cash budget has completely changed the way we spend our money. I know once that envelope is empty that’s it. No more spending!
I think the area it has helped us the most is with eating out. I love to eat out (it means I don’t have to plan ahead for dinner and don’t have to do dishes). But it is also very expensive. Each pay period we put a set amount of cash into our eat out envelope and once that money is spent, we can no longer go out to eat. I bet we now save hundreds of dollars a month not eating out because we used to eat out three times a week or more.
Also doing the cash budget has allowed us to set aside money for future expenses. We now set aside money from every pay check for our dogs’ vet expenses and as well as for clothing. Now we when need money to take the dogs to the vet or buy new clothes, there is no freak out or worrying how we will afford it. Before we would have just put it on our credit card. Now we can pay cash!
I highly encourage everyone to get on a cash budget. I feel much more in control of our money and our spending than ever before. I was very resistant to doing a budget. I thought it would suck all the fun out of life. But now I realize we have more freedom. I don’t worry about whether or not we will have the money to buy groceries at the end of the pay period.
Great points Jessica! I definitely love being on a cash budget because of how it reduces our stress level on things like future expenses. Last week I needed to have some routine work done on my car, and because the money was in the budget it was no big deal at all to get it done~ we’d paid for it already in our car account! I also love that you feel like you have more freedom now… that’s what makes it worth it!