Do you ever find that money just seems to slip through your fingers? I mean, you get paid and almost overnight it’s gone! Everyone has felt that way at some point.
Today I want to introduce you to using cash in order to pay for five categories of spending.
You might think, “Why not just use my debit card? It’s the same as cash!” Although debit cards are better than credit cards it still doesn’t register in your brain the same way spending in cash does.
Studies show that when you use a debit OR credit card you have a tendency to spend more than you originally planned. When using a debit card, at least we know that we are spending our money in our account. However, when using a credit card the facts are hard to ignore.
Value Penguin did a study in early 2018 that showed people who make purchases with a credit card will spend as much as 83% more than those who spend with cash.
Similar studies show that when people pay with actual cash it shows up as pain in the brain. Interesting that when we use cash we feel pain!
So, if studies prove that we spend more when we use cards, then it should be something we seriously take a look at!
Why not consider trying a “cash only” diet in five categories for 30 days? What is the worst that can happen? You hate it and return to your old habits or you love it and end up with more money at the end of the month. It is definitely worth a try!
Here are the five categories Jeff and I use cash for. We have done this since 2009 when we went debt free and we love it! We don’t feel restricted and in actuality, we feel more freedom than we ever did before. We know if there is $120 in the entertainment envelope then that is money we CAN spend without any guilt or wor
Five Categories for Cash Only Spending:
Gas is a necessity for anyone with a vehicle so it needs to be part of your budget. The total here will be different for everyone based on how much you drive, how often and what gas prices are in your area.
If you work full time you are going to need to consider that when making your cash calculation for this category.
We pay for gas out of Jeff’s paycheck from one of his university jobs. He gets paid on the 1st and the 15th of each month. So, when that check shows up we have figured out we need to put $240 each paycheck back for gas. This is plenty for us and always leaves money left over.
Examples in this category would be kid’s birthday parties, a family member’s engagement party, a parents wedding anniversary, etc. This used to throw our budget way off so we decided to add it to our cash categories.
You have to decide what you can afford and will need in this envelope each pay period. For us, we put $50 each pay check back for this category. Sometimes, we don’t use it at all so it adds up and other times we clean it out to zero. It just depends on what is going in our world at that time.
You might not have enough room in your budget for $50 or you might have enough money to put a lot more.
Either way, you will have money put back for these events and it doesn’t break the budget at all! You have planned for it.
Side note: Even if you only have enough for $10 each paycheck, start there! You have to start somewhere.
Now, I know this might seem like a ridiculous category but it was a need for us at one time. It’s a habit now, so we haven’t cut this cash category.
Haircuts are a necessity and everyone in your family will need them fairly often. Depending on where you go this can be $20 a pop or if you’re getting your hair colored it can be upwards of $75 or more.
This can certainly bust your budget so putting money back in advance will ensure there is plenty of money for this need.
We ALL want to go out to eat, see movies at the theater and buy a huge bucket of buttered popcorn! So plan for it.
Put back enough money for your family to go do fun things. Dinner out or a game of bowling can be costly so plan accordingly.
When you look into your envelope and see $75 then you know you have enough to go have fun. On the other hand, if this category only has $5 left then you might want to stay in and just rent a movie.
Either way you know that money is only for having fun! You can spend it knowing you aren’t using money that needs to be used for electricity or water.
Okay, this category is for all of the things you just cannot plan for. Surprise things like pictures at school that your kid forgot to tell you about until the morning of. Losing phone chargers or your child losing their name badge for school. Bumping into an old friend and it leading to an impromptu lunch date. Your child needs dance shoes by Friday and you don’t get paid for another 10 days.
All of these are very important and necessary but if you haven’t planned for it then you will be more prone to use a card. Using a debit card might eat into your water or electricity money and using a credit card is using future money that you haven’t even earned yet. Neither is good!
A miscellaneous category catches all of the surprises that life will certainly bring.
Getting Cash out of the Bank in advance:
So, each pay period I go to the bank and pull out the pre-determined total of cash we will need to pay for these things until the next pay check arrives. This becomes our budget for these items. When the cash is gone, we don’t go out to eat anymore! When the cash is gone, we have to wait another week or two to get a haircut. You get the idea here.
It might take you a few months to figure out what cash totals you will need in each category. Don’t give up though! You will find your perfect total and will settle into your new system.
I have given you our top five categories, but I highly encourage you to consider picking your top 5 categories for cash only. Try it for just 30 days and see how it affects your spending.
We all want to keep more of our money. Paying in cash for things will force you to stay on budget and not overspend in certain areas. Not overspending will free up more money for things you want or need like paying off debt, going on vacations, landscaping, remodeling your home, or putting more into retirement.
Comment below and let me know how your 30 day cash experiment went or what other categories you have used for cash only.