I’m moving towards budgeting with cash, known as the “envelope system.” I’ve never used cash to pay for fluctuating expenses before, and I’m not used to having it around on a daily basis. I have used Mint.com in the past to track how much of our budget is still available for certain items throughout the month.
Balance the Budget
Duh! A no-brainer, I know. But you can’t have a deficit budget when you’re using cash. Aside from our fixed expenses, like our mortgage, student loan payments, mobile phones, a bus pass, and utilities, our shoestring budget for July looks like this:
There are some one-time expenses in there — a haircut for Little Stapler, some dry cleaning that I’ve been meaning to drop off, and three birthdays.
If you have a cash cushion, withdrawing enough money for your expenses for the entire month isn’t difficult. But for those who are living paycheck to paycheck, an entire months’ spending is not waiting in the checking account — start by withdrawing on a weekly basis.
We received the check we’d been waiting for, so we have the cash cushion as soon as it clears the bank. At that point, I’ll go to the bank and withdraw $760. I’m not sure that an ATM will let me withdraw that much at once. If not, I’ll go back again the next day.
For us, there are still some expenses that I won’t pay for with cash because they’re cheaper online. For July, that includes a big box of Huggies baby wipes from Amazon because they were offering a $10 coupon, so I got it for $3.63. I also ordered my nieces’ birthday presents online because I wouldn’t have to pay for shipping.
Everything else will be cash.
Label Envelopes and Fill with Cash
I labelled an envelope for each budget item, and put the one-time expenses (haircut and dry cleaning) in one envelope. This way, I can re-use the envelopes each month. Then I stuffed each with a corresponding amount of cash.
(The baby supplies envelope doesn’t include what I already spent on amazon)
Only Spend Money from the Envelopes
This is obviously the honor system. Dave Ramsey won’t knock down your door if you charge something to a credit card. But it’s important to stick to the cash, in order to stay on budget.
If you did have to charge something, withdraw the cash from the appropriate envelope anyway — and save it for the next month. The challenge is not to see if you can go without using a credit card. The challenge is to stay within your budget.
The biggest challenge would be to have cash left over for the next month!
Ready to get started? Who’s with me?