Todd Christensen Profile Picture
Staff Writer at Debt Reduction Services

Using the envelope system can help you better budget your money.Reign in Your Spending by Using Cash Only

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 waterboarding.  Managing your money, however, doesn’t need to be tedious. In fact, finding hacks for budgeting can ensure your good habits stick and are sustainable. If you are one of those people that hates writing down and tracking your spending, these tips are for you:

Tips for Using the Cash Only Method:

  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account in order to pay the fixed expenses (bills that you either need to mail in a check to pay, have automatically withdrawn, or pay online, such as rent/mortgage, utilities, car payment, student loan, church contributions, etc.)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 (or have your company direct 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 what is left 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 you don’t have to track every single expenditure since there is no chance of overdrawing your account, it might be helpful in understanding your spending habits. We often spend more on certain categories than we would have guessed. Knowing this can help you either adjust how you allocate your cash the next time around or cause you to spend more consciously in that category.

Understand, once the money is gone, it’s gone.  Seeing “the green” tangibly leaving your hand may deter unnecessary spending that using a credit card tends to encourage. Did you know it’s been proven that people consistently spend more when using a debit or credit card? This is one reason the cash-only method is effective.

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.

After even one month, you will start to notice a difference in how you approach spending and decide what to spend your money on. After a few months of practicing the cash-only method, You may feel disciplined to carry over your reformed spending habits back to your debit card. Though, you may be happy with a balanced usage of both; using cash for your challenging budget categories, and debit for the rest.

Do You Have Questions About or Suggestions for Using a Cash Only Method to Manage Your Money?

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If you need more information on controlling your spending by only using cash or have any other questions about improving your personal finances, please feel free to comment below and we’ll answer as right away!

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