Why a Cash Budget System Might Not Work for You
What is a cash budget?
A cash budget method prevents you from overspending by only allowing you to spend in cash. And who doesn’t like not over spending?! Each month (or two weeks, or week) you pull out cash and use it for your purchases. Some popular categories include groceries, entertainment, and other weekly shopping needs.
At the end of the month (or week), you can either save your leftover cash in one of your savings categories, or you can roll it over to the next month. If one category empties, there are other categories to borrow from. You should try to avoid borrowing, though.
A cash budget works really well for people who have racked up some credit card debt, or tend to overspend on cards. When you are only using cash, you can’t overspend! There are no credit card bills to pay, you have to literally have the cash on hand. However, like any budget, there are pros and cons.
And, if you discover that this option is not for you, then check out my overview of other budgeting methods right here!
Cash Envelope System
The most popular method for a cash budget is the cash envelope system. Sometimes these can be called the same thing. In any case, this is the most popular method of tracking your cash budget. It’s not smart to just draw out a wad of cash and spend all willy nilly. So, in this version of the cash budget, you take your cash out and put it in categorized envelopes.
These envelopes serve as a holder for each category. Popular categories include groceries, eating out, clothes, entertainment, gas, and other weekly expenses. On the outside of the envelopes, you can track your expenses and subtract as you go.
This method has gotten so popular, that they’ve developed special and amazing envelopes to track your expenses! You can purchase here. AND, there’s also a wallet designed just for those on this budget. It’s perfect. Check it out here!
Need help organizing your finances? Try my FREE kit right here!
Cash Budget Pros:
Not over spending:
The biggest pro is that you literally cannot overspend on a cash budget. Once you have your money, that’s it.
Awareness:
In addition to not overspending, it makes you more aware of your spending. I found that I was thinking a lot more carefully about how I spend my money when I had to physically see it leave my envelope. That was HUGE for me.
Simplicity:
Also, it’s really easy to do. Using a cash budget is the best beginner budget method because it’s so simple.
Cash Budget Cons:
Inconvienent :
For us, however, we didn’t end up sticking with it for long. If you don’t live near a bank or a fee-free ATM, you end up going out of your way a lot to get the cash.
Cash Back Benefits:
In addition to that, we like our credit card benefits! We have a great card that gets excellent cash back. It is used responsibly for only the things we need, and then pay it off each month. It totaled several hundred
Not all cash:
There are several bills that we just can’t pay in cash. Many of our monthly expenses would take a written check in the mail to pay without a credit card or an automatic withdrawal. I’m too chicken to link anything up to my checking account (hacking, and all) so credit cards are for us! While checks and stamps are not too expensive, it is an extra cost. And, kind of inconvenient.
So, if you don’t see those as too negative, then perhaps cash envelopes is for you! Give these awesome envelopes a try…but before you do that get your finances in order with my FREE kit right here!
Want to take a look at some other budgeting options instead? Check out my overview here!
