Paying off debt is no joke. If you are paying off your own debt, you know it’s true. Sometimes it feels like you will never get there.
I’ve been there. It took us YEARS to pay off our debt! Some months it felt like we would never reach the finish line. But we did. Way quicker than we were expecting.
Many friends have asked me how we’ve been able to stick to our budget so well. Or they wonder what “system” worked best for us while we were working to pay down our debt.
The number one tip I say EVERY time? We use a cash budget!! It helped us stay accountable to our budgeted amounts, and it was really easy to track how much cash flow was left to spend.
It is usually at that point I either see a look of shock or disbelief in their eyes. You know, that whole deer-in-headlights thing. Sometimes I hear every excuse under the sun about why that would never work for their family – It would be inconvenient to have to stop by the bank all the time. I’m afraid someone would steal my cash. I’m afraid I would lose my cash. I don’t know what I would do when I run out of cash. I wouldn’t know how much cash to take out. I treat my credit card the same as I treat my debit card.
And, my personal favorite, debit cards and cash are the exact same thing. Um, no. They. are. not.
Unless you have impeccable self-control, even with the best of intentions, treating a debit card the same as cash is impossible. But I’m guessing if you have impeccable self-control you wouldn’t have debt or cash flow problems. (Don’t worry. I’m right there with ya!)
We use a cash budget and it is the number one thing that has helped us make so much progress in paying off all of our debt. We are SO close to reaching some big financial goals, and I truly owe it all to our cash budget. I just love it so much I want to shake some sense into all the people that refuse to just try it!
Every payday, I sit down to pay all of my bills that will be due in that pay period. 99% of my bills are paid online. Then I withdraw cash from the bank to cover almost every other budget category, except gas. We use our debit card for buying gas. (For more on that decision, see this post here.)
We withdraw cash for our groceries, household items, miscellaneous items (oil changes, hair cuts, school expenses, etc.), fun money, and eating out. I then put the amount for each category into a separate envelope. For more details on how we set up our cash budget, read our post on cash budgets here.
After I’ve withdrawn the cash and accounted for every expense we will have that pay period, I divvy up the rest of our money to debt and savings. Right now we are aggressively paying down debt, so most of our extra money goes straight to debt.
I can rest in the knowledge that all of my cash envelopes are full, and we have enough money put aside to cover all of our expenses. I also can rest in the peace that we are using every penny wisely, and we are making progress on our debt payoff journey.
The thing about cash budgets is that once the cash runs out, it forces me to stop spending. When it’s gone, it’s gone. You can’t overspend. If you overspend in one category, you have to borrow money from another category.
Not only is it impossible to overspend, but cash makes it harder to even WANT to spend. When I am tempted to stop by a fast food place for an easy dinner, or when I would love to run in for a quick snack when I fill up at the gas station, I can see our dwindling cash in my envelope and know that if I hold off right now, I will have more later. I don’t WANT to spend my precious Jacksons and Benjamins.
Before, when I used a debit card for all purchases, it was really easy to justify these expenses in my mind because we “had plenty of money in the bank.” It was easy to swipe a card that was attached to a far away bank account. I thought a couple bucks here and there wouldn’t break our budget too bad.
But using cash makes it harder to break your budget. It’s much more painful to spend! You think twice before spending those precious bills.
As I’ve mentioned before, I’ve heard many reasons why people don’t want to try using a cash budget. But I also want to mention that most people who have tried it, have loved it.
Using a cash budget is NOT the same as using a debit card. And while it might seem a little inconvenient to have to stop by the bank once or twice a month, that ten-minute errand is a small price to pay for the control it gives me in my spending.
I have literally saved hundreds of dollars a month by switching to a cash budget. We are meeting our financial goals and staying on track to pay down debt. All because we switched to cash for most of our purchases.
If you are having a hard time sticking to a budget or you are wanting to make more traction on your own financial goals, I encourage you to give a cash budget a try. Commit to it for a couple of months, and I promise you will sing its praises just like I do.
Who else uses a cash budget, and what goals are you trying to reach? Does anyone else have any tips for cash budgets?