Many people have asked what is my number one tip that helps in our finances. Every time my answer stays the same. We use a cash budget for groceries.
If you missed our previous posts of this series, we’ve been taking a closer look at our finances and taking baby steps to build and stick to a budget. In the first post, we talked about the importance of knowing your numbers – how much comes in, how much goes out, how much is in your bank account. In the second post, we talked about making a plan for our money, outlining where each dollar will go and making sure we follow through on that plan.
Now I want to talk about the best way we actually stick to our budget…using cash. I know most of you might be shaking your heads at this, thinking that will never work for you. I used to think the exact same thing! But hear me out on this…
Using cash has been the number one thing that has helped my husband and I stick to our budget. I’m going to say that one more time…Using cash has been the NUMBER ONE THING that has helped my husband and I stick to our budget!! It is the only thing that helped us make sure that we have money left over at the end of the month.
Having said that, I know a lot of people who are great at managing their finances and never use cash. I also know some that tried cash but seemed to burn a whole in their pocket every time they needed to get gas, or wanted to splurge on a quick breakfast on the road.
I will be the first to say, cash isn’t necessarily for everyone! BUT if you have tried managing your budget without using cash and always end up wondering where all your money went, this might be something you at least try. It made all the difference in the world for my family.
For anyonewanting to try this approach you should know we don’t use cash for every category, only those that are hardest for us to stick to our budgeted amount.
I want to show you how easy it is to stick to a cash budget, and prove why it really does work! Here is how to make a cash budget work for you…
- Decide which categories of your budget you will NOT use cash for.
We pay 99% of our bills online using our bank’s online bill pay. A couple things are paid with checks – school fees, field trip payments, etc. A couple things are paid with our debit cards. Gas is something we use our debit cards on. For me, the inconvenience of going inside, standing in line to pay, patiently waiting for the cashier to give you your change, all while juggling three kids for gas every week is not worth it for me. Some people might do this, but for me I don’t think paying in cash helps. Gas costs what it costs. There is no way to really cut that cost by using cash, so swiping our card works best for us.
2. Decide which categories you WILL use cash for.
Take a look at the areas of your budget that are really hard to stick to. For example, if you would like your grocery budget for the month to be $500, but you always spend $600-700, this would be a problem area for you.
If you love eating out, maybe you give yourself a couple hundred bucks a month for eating out. But when you look back at the end of the month, do realize you spent almost double the amount you originally set? Maybe buying clothes for the kiddos is your weakness. Or shoes!
Whatever area you struggle the most in, that should be where you are using cash. For us, it is groceries, eating out, fun money, and our miscellaneous fund (haircuts, things for around the house, etc.) When we use cash in these categories, we have to stay disciplined and keep to the budget we set. If are consistently spending more in a certain category, we adjust our budget and withdraw more cash for that category the next month.
- Pull cash for those categories.
Every time you sit down to pay bills, make it a point to stop by the bank and withdraw cash – only the amount you need. I usually do this right after pay days. Divide the cash (whatever amount you decide) into different envelopes for each category. Groceries, fun money, eating out, whatever works for you.
The thing about using cash is it hurts more to spend. By staring at all those hard-earned dollar bills, you will think twice before buying something you know you don’t need. And once it’s gone, it’s gone! You can take cash from another category’s envelope if you have to, but once you run out, you run out.
I know for some this seems inconvenient, but the rewards are worth it!! It forces you to curb your spending and to really evaluate each purchase. Not only does this help you stick to your budget, but it also teaches you to be even more appreciative for what you do have. I have grown so much in my contentment, being content with what I have and refusing to let “stuff-itis” break the bank.
The five minute “inconvenience” of withdrawing money every other week is an investment that saves us hundreds of dollars each month.
I promise it works!!
The thing I love best about using cash? If you don’t spend every dollar, you will have money left over! I put my extra money at the end of each week into a separate stash. Usually this money is being saved little by little for a specific purchase, such as a new TV or a mattress or extra spending money for our family vacation.
- Make sure you keep track of how much you have spent in each cash category, and how much you have left to spend.
Keep a running record of what is left in each category so you don’t accidentally overspend. I usually write the amount on each envelope and each time I spend in a category, I subtract and write the new total. It takes hardly any time once you get in the habit of it. And I always know at a glance how much money is left for the week.
This is a LOT easier than it sounds. For example, I only grocery shop once a week. So in my grocery envelope, I’m only subtracting what was spent one time. Usually, I just transfer any extra money in that envelope to our “extra” envelope, and I don’t have to think about it again.
The more you use a cash budget, the more aware you are of your spending. The more aware you are of your spending, the less you spend unnecessarily.
I’ll be honest…there are days sticking to a cash budget will be hard. Some days will be harder than others. But in those hard days knowing your “why” will keep you motivated to stick it out. Having a purpose in your sacrifice is something we will talk more about in our next post. For now, continue to know your numbers, follow the outline of your bills made at the beginning of the month, and commit to a cash budget that will work for your needs.
If using cash is still something you are wary about, I challenge you to commit to it for three months. Three months isn’t a long time in the grand scheme of things! In just three months, you will know what works for you and what doesn’t. If it doesn’t help you stick to a budget and save more, no harm done. Just go back to swiping your debit card.
BUT! I can almost guarantee that if you commit to three months, and really give it 100%, you will also start praising the benefits of using a cash budget. You have nothing to lose!!
For more on this series: