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Today’s Budgeting Basics Tip is about Using Cash. I know that this can be a polarizing issue so I’m going to give you both sides of my experience and I want to hear your thoughts on this topic.
We’ve used one main system since we got married. Our budget is on the computer and every time we have income it gets divided into one of our many categories. We then save all our receipts and enter them 2-3 times a week and each receipt total is deducted from a category. It’s been really easy for us to track how much we have remaining in each category. We also use cash for specific categories such as Food, Fun Money and Clothing. I had gotten kinda lazy at the beginning of the year about using cash and was using my credit card a little more (I’m going to blame it on being 8-9 months pregnant and having a newborn), but recently we decided to get back into the discipline of using cash. Here are my thoughts on the positives and negatives of using cash.
The Positives:
- Research says you spend 25% Less when you use cash. I recently switched back to Cash in a few of my budget categories to keep me accountable and it really has helped.
- You don’t have to track receipts. For me not having to keep up with every single receipt is nice, I’m not nearly as worried about missing a receipt and having my budget out of balance.
- You instantly know what you have remaining to spend.I love knowing exactly how much is left in each envelope. I’m never worried about the exact amount or putting in receipts before I go shopping.
- Planning Ahead. I know that I always plan ahead more when I use cash because I know I need to be efficient with what I buy, I also find myself tracking my purchases better as I go throughout the store.
The Negatives:
- I don’t like paying for a purchase from more than one category with cash. For Example, I like having lots of categories and so It’s hard if something is $4 from one category and $13 from another. I try to keep smaller bills, but I never seem to have the right amount from each envelope. I much prefer using the credit card for this type of thing because it was much easier to enter the exact amounts from each category on the computer.
- Going to the bank is my downfall on the cash system.I forget to go to the bank, then I end up needing something and running to the store. It’s definitely where I struggle to stay on track. I just have to remember to get cash the first day of the pay period so that I stay on track.
- I don’t track what I spend.I’ve mentioned several times that I’m the spender and not the saver. Having my husband as my accountability when he was entering receipts forced me to stay in budget. When I have cash, I’m way more likely to spend grocery money on riding the mary-go-round at the mall or I spend extra clothing money on lunch. Since I am not the disciplined one when it comes to money cash is much easier for me to blow through than if I know my hubby will be seeing the receipts and asking me what I spent the money on :)
I’m not going to say that one system or the other is best. But I can say this. If you are having trouble getting your budget in line switch to cash! For example, I know that I tend to overspend in 1-2 categories, for me it’s clothing money and lunch money so if I have those in cash it creates boundaries for me. I know exactly what I have to spend and I have better control over the situation.
I would love to know, Do you use Cash, and what are the advantages/disadvantages that you see?
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{ 5 comments… read them below or add one }
Your budget system sounds exactly like ours–excel spreadsheet with multiple categories. We tried cash with a few categories, but I didn’t like having to remember to grab the cash envelopes before I left home since I wasn’t comfortable carrying them all the time. I also felt like I couldn’t track my expenses in a certain category very well. We’ve now gone to completely debit/credit card except for the small amount of blow money we each get every month.
Our excel sheet budget also doubles as our check register and my husband updates it several times a week. That way our budget is always 100% accurate and up to date and I always know exactly what I have left to spend, especially towards the end of the month.
Has anyone heard of the “Budget Book Method”? I started using coupons about 9 months ago. I was so excited to see how much I could get for my money…..but I still think I was spending just as much as before, but just getting more items. Recently, my husband was hurt at work and our income was greatly reduced and we needed to stick to stricter budget…I recently started trying the cash method for our groceries (a big variable expense for us). So far it has helped me a lot. We used out credit cards for everything, but always pay the balance every month. I completely agree if you pay cash you are so much more aware of what you are spending.
Thank you for this post. I am also happy to see someone else that likes to “rob” money from one category to use in another. A few months ago we tried the Cash approach, but neither of us have very good discipline, so if the “fun money” ran out, we would take money from the food to go to the movies or shopping. I also agree that cash IS easier, because when its gone, there is no more spending. Unfortunately, when we ran out, we just switched to using the debit card, and overshot the budget.
Like Shannon, June 1st I have worked out a budget for us to use. I hope we can stay on task and stick to it.
Just one question.. What Categories do you keep in cash? I am thinking about an envelope for groceries, Entertainment, and clothes shopping. and I am on the fence about one for “pet care” i.e haircuts for the dog, dog food and dog biscuits.
again thanks so much!
Well put together post! I appreciate that you gave both sides of the story. I used to be a cash person then switched to being a credit card girl when I finally had ‘the good job’. I can vouch for the fact that I would spend more money when I used credit.
My grandma convinced me to go back to using the cash system, and helped me to make it simple so I wasn’t so concerned over all the categories. She’s 90 and has been using a cash system for 60+ years so she’s pretty good at it. The one thing my husband and I worked out was that certain categories could be debit card/credit card ones not only for better tracking but so I didn’t have to carry so much cash with me. That has helped b/c I know it’s still cash but I just use the card to pay for it.
Instead of paying cash, I still feel like I’m shopping with cash but at the end the cash looks different. Maybe something like that would help you?
Again, terrific post!
Thank you for such a great post on this topic. I really am working hard at better money management and it’s good ot know I am not the only one who struggles. I also love your honest apraisal of each ‘system’. Starting June 1st. I have a ‘budget’ and hope to stick to it each and every month. I plan to do the cash system for some things, I will let you know how it goes.
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