I am not a big ca$h user. I like to use Mint to track my spending, so I put almost everything on my credit card and then I pay it off in full every month. I watch Mint like a hawk, so I’m never surprised when my bill comes in because I have been watching my spending and not blindly swiping my credit card.
You might not be like me. You might LOVE carrying ca$h around and you might hate using your credit card. You might have tons of ca$h lying around from that time you robbed a bank, so obviously you should spend that instead of using your credit card. That’s totally smart! But you still need to follow a budget, even if you are a cash user.
Here is one method I have heard suggested for budgeting using cash.
You start each month by taking the amount of money in your budget out in cash. Is your budget $800? Take out exactly $800. Then, divide it up based on your budget categories. I have heard this called “the envelope method” because one way to keep it organized is to carry around a pile of envelopes full of cash with each budget category written on them. You can also buy one of those coupon sorters. Or, you can use paperclips and post-its. Whatever. You pick how to keep it sorted! The point is- if you have spent all of the money in your envelope for groceries, that’s it. You can either borrow from another envelope, or you can put some groceries back on the shelf. You’re breaking the rules if you use your credit card or take out any more cash (and you’re kind of breaking the rules if you move money from one envelope category to another, but whatever. You are your own boss, here).
I have also heard that this is very effective if you find that you go overboard Christmas shopping. Decide before you shop how much money you are going to spend on Christmas, total, and then how much you are going to spend on each person, and then use the envelope method. This is especially useful at Christmas time because gifts for other people (that you have to pay for all at the same time) are a budget abnormality, and even a budgeting rock star can lose track. This way you have planned ahead, and you won’t have any fiscal regrets in the New Year!
This is also very effective because when you pay with ca$h, you are more aware of how much actual money is leaving your account. When you break a $50, that $50 is never coming back to you. If you have a problem with overspending in general, it is often advised that you switch from swiping credit cards to a ca$h only scheme.
Convinced that budgeting is for everyone, yet?