Our Walk With Cash Budgeting

Our Walk With Cash Budgeting

When Ms. Blue Ribbon and I started on the path to being debt free the one thing I can know for sure that helped speed it along was using a cash budget. We didn’t use cash for everything, just the four major troubled spots in our budget: Groceries, Gas/Fuel, Eating Out, and Miscellaneous Items. Everything else was recurring/fixed expenses like utilities or insurance.

Like many, eating out was a massive drain on our budget. We love eating out but I’ve gone on about that before. Controlling our spending was very difficult. We tried controlling ourselves but it wouldn’t make much of a difference. Somehow with eating out, we were still spending a lot on groceries (not sure how that works).

Something had to change.

We moved to a cash budget and the results were almost immediate. We only let ourselves have $100 a month to eat out with (a few decent places or two nicer places). It is hard to go out to eat when you only have $5.63 in the “eating out” envelope.

We would hit our monetary walls frequently for the first year of our cash budget. Sometimes having to “rob Peter to pay Paul.” We would never take from other envelopes to eat out or buy junk we didn’t need but you have to fill up your car and put food on the table. It felt ok to borrow for those two especially if there was a lot of extra in the Miscellaneous budget for the month. If we did need to buy something that would come out of the Miscellaneous budget and we didn’t have enough it would wait until the next month.

Cash budgets are amazing. There is a psychology to them that helps you spend less than you ever would if you were using a credit card. Although, all good things must come to an end.

Running Short

About three months into the experiment we ran into a dilemma. It was December and we hadn’t planned ahead for a big expense…Christmas. As you know it’s the most stressful time of the year. We ended up gritting our teeth and trying to pinch every penny we could. We burned through our pantry meals and bought only the bare essentials. We were able to keep enough money saved to buy presents. Had we not been on the cash budget we would have been massively in the red for the month. Starting the next January we set aside a little money every month to make December not be as painful. This also taught us to plan ahead for other big expenses like other holidays, parties, and of course Minnesota State Fair.

Easing Up On The Pedal

After six months of cash budgeting, we had realized that the purchasing of gasoline was NOT causing us to go into debt. We hardly drove at all so I moved that back onto the credit cards. I still diligently monitored the spending using my favorite budget app Mint.com. I even used their rollover feature so if we did have extra in that budget we would have it the next month. Eventually, if we did have to travel somewhere far and use more gas than normal we would have that extra room in the budget to use.

Around nine months into our cash budget we moved the groceries back onto the Target Red Debit Card. (I feel the need to call out the debit part of that. There is no reason to open a Target Credit Card when there is no added benefit. Both will give you 5% off your purchasing and free shipping. The debit card will just pull directly out of your checking just like any other debit card.) Just like with the gas budget we added it to our Mint account and made sure to check the rollover box.

All Good Things…

One year of cash budgeting for eating out and miscellaneous expenses. Every month I went to the ATM and pulled out cash to cover out budgets. One year of wrangling our spending and we had done it. For the better part of that year we had some amount of surplus that was carried over from one month to the next. At this year mark our gas and groceries were still doing awesome. Finally, we decided to move the last two budgets off of cash and over to the credit cards. I still watched every budget diligently on Mint since I was so worried we were going to slip up again.

We didn’t. It has been eight months since dropping cash budgets and we haven’t had a single problem. Our spending is completely in control. Cash budgeting was the best thing we ever did and I’m glad we don’t do it anymore! The pain of going to get cash for the month, the pain of not having money for something you want/need to buy is gone BUT it was needed. We needed the pain of counting our money at the store and putting items back we didn’t need. The pain of pushing off expenses we may or may not have needed helped us learn how to control ourselves to avoid spending money we don’t have.

Have you ever done cash budgeting? What parts of your budget are hard to control?

3 thoughts on “Our Walk With Cash Budgeting

  1. Cash envelope budgeting can be very powerful! For a person or couple who are struggling to first get things in control with budgeting, this is a great option to consider.

    My wife and I did it for a while, then moved away from it. The main reason of moving away from the cash is that we track a lot of detailed categories. We found ourselves splitting purchases across budget categories, moving cash around, and trying to keep it all straight. It was a hassle.

    Most people do NOT need the level of detail we use though – so this shouldn’t be an issue for them.
    Brad – Financial Life Planning recently posted…Why You Need To Understand How Mortgages Work

    1. Yeah going to Target was tough when some purchases were groceries and others belonged in miscellaneous. I can’t imagine being that detailed with it. I would have gone insane.

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