I’ve never tried it.
There. I said it. I claim to be a frugal, level-headed, budget-minded person, and yet I have never, not even once, used a cash budget. Don’t click that big red X in the corner of your browser just yet, though! I can explain.
The best financial advice for people just starting out on a budget is to pay for as many of your expenses as you can with cash. The idea is that if you have to spend cash, you’ll experience the hurt of seeing your money disappear. For most people, using a debit card (or credit, but let’s not do that, ok?) doesn’t inflict the same pain. In addition to feeling yourself become poorer every time you shop, there’s the danger of embarrassment if you don’t have enough in the envelope to cover your purchases. Cash budgeting certainly makes for more careful shopping. Cash-only is where it’s at! I am well and truly convinced that this is so.
So why haven’t I done it, myself? Well, I have an electronic envelope budgeting system that works almost the same way. Each month, I do my budget by allotting the necessary amounts into each budget category, then subtracting what I spend (using plastic) from that “envelope”. I have the usual reasons for avoiding cash. I lose things. People steal things. Plastic is easier to use. I don’t want to have to touch other people’s grimy money all the time.
The only problem with this is that, while I typically stay within the bounds of our written budget, my husband does not.
He likes to spend money more than I do. Each month, his lunches and casual spending go over his allotted amount, and I end up having to shift money from some other part of the budget—typically clothing or other incidentals, but sometimes it comes from what should have gone to our savings account, which is terrible. We are consequently not saving as much as we could.
So I convinced my husband to switch to a cash budget for his own spending this month. Guess what? Halfway through the month, he ran out of lunch money.
Until our little cash experiment, I don’t think he fully realized just how much he was spending each month. I make an effort to always have leftovers or sandwich fixings available for his lunch, so he’s not going to starve for the next two weeks. But unless I miss my guess, he’ll be more careful with his dining out next month. He’s a smart guy. He’ll adjust his behavior according to what he’s learned.
And me? Next month, I’ll be switching to a cash budget for groceries, clothing and household expenses. I’m wondering if it truly will change the way I shop. After all, I have the numbers right in front of me, and my money looks pretty good as it is. But after witnessing my husband’s experience, I can’t help wondering if using cash will spur me to do even better.
I think I’ll give it a shot. Who’s with me?
What kind of budgeting system do you use and how does it work for you?