Back to Basics: The Cash Only Method

If you’re like a lot of people, the thought of writing each expenditure down or filling out a complex budget planner seems overwhelming and something akin to water boarding.  If you are one of those people that hate writing down and tracking your spending, these tips are for you:

  1. Start out your month figuring out exactly how much cash you need in the checking account in order to pay the fixed expenses (bills that you either need to mail in a check to pay, have automatically withdrawn, or pay online, such as rent/mortgage, utilities, car payment, student loan, church contributions, etc.)  Deposit the portion of your paycheck that you will need to cover those payments into the checking account.
  2. Deposit your savings into the appropriate account (saving account, IRA, money market, etc.)
  3. Take the rest of your money out in cash.  Create a sort of “filing system” for your cash such as marked envelopes, jars, or a filing folder.  Divide the cash up by the spending category, such as groceries, entertainment, dining out, clothing, and spending cash.

As the month progresses, you will spend that cash on the items you wish to purchase, leaving the credit card and debit card at home.  While it might be helpful in understanding your spending habits, you don’t have to track every single expenditure since there is no chance of overdrawing your account.  However, once the money is gone, it’s gone.  Seeing “the green” tangibly leaving your hand can deter unnecessary spending that using a credit card tends to encourage.

Using cash also adds a beneficial inconvenience to shopping.  For example, if you’re away from home and decide you’d like to dine out, you’ll have to go home to grab the cash.  By the time you get home, you may not want to leave again and, instead, may settle for a homemade meal.

If you have any questions, would like to discuss your financial challenges, or are just looking for advice, please contact us at your convenience. As always, we are here to help and look forward to hearing from you.

1-877-OUT-DEBT (688-3328)

www.debtreductionservices.org

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