I was half-way through my grocery shopping today when I realized I had walked out of the house without taking cash from the “food” envelope.
The Envelope System
Cash spending is a new thing for me. This is my first month, actually. I’ve started off small — just four categories. (Food; gifts; clothing; and booze.) (Just keeping it real, people.) My husband recently deployed, and my hope is that, when he returns in four months, I will have this cash thing down for myself and we’ll just need to work together to help him remember to plan ahead for his day and take the cash he needs accordingly.
Based on the budget that we agree upon at the beginning of each month, of course! *ahem*
It Does Feel Simpler to Swipe the Debit Card
My reaction in the grocery aisle when I realized I was cash-less was very interesting to me: After the initial annoyance, I immediately felt relief.
Mind you, I still stuck to my budget, which was $50, thankyouverymuch. I’m participating in the pantry challenge and arbitrarily decided one week into January that I would keep the grocery budget for the month under $200… So far so good.
So why would I feel relief? I didn’t take forgetting to bring my cash as an excuse to spend more, after all…
Or did I? A few things ended up in my basket that weren’t on the list: I justified them because I knew I would use them into the next month and I would still make my goal of $50. Would that have mattered to me had I known that, in using cash, whatever amount was left over could just roll over into the next month? instead of the “needed” (but unplanned) products? These weren’t deals I was taking advantage of, after all. Just little extra things: some extra produce; and a treat for my son (who was with me)…
It just felt like the pressure was off. Like I was playing a game. A game I still wanted to win, but I just found out that the score wouldn’t be published. The pressure of going up to the cashier and making sure I had enough to pay the bill was no longer there. I could just hand over the debit card, business as usual — even a few dollars over wouldn’t matter. Close enough, right?
Cash Vs. Debit?
I have heard from many people, and I have read many opinions, that cash spending is no different from using a card, so long as you have a budget. After all, it’s all coming out of the same account.
However. Many financial gurus — Dave Ramsey among them — quote statistics about how much more people spend when they use a card. Forking over cold, hard cash just feels different; people tend to be much more careful about how they spend it.
The Jury Is Still Out
I think, for us, that cash spending will be instrumental in creating a workable budget that we stick to. I probably won’t know for sure until The Hubs returns and we are doing this together again. Once we are in the groove of creating and sticking to a budget…Will it matter how we pay for those purchases? Hmm…
Thoughts? Who out there is on the cash system? I am talking about variable spending here, not bills and mortgage/rent and such. Has anyone gone back and forth budgeting for variables using cash and then switching to card, and vice versa? What difference, if any, did you notice in your spending? Do tell. Let us learn from thy wisdom, please.
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Hi. I just found you via a comment on The Slow Food Experiment. Right now I don’t have the time to read all of the comments on this post, but for us cash has been way more efficient. We rarely have a month where we don’t go over what we planned and end up using our debit card, but we are still spending much less, like an average of 800-1200 dollars less a month! I carry the cash and spend most of it (Husband has a gas envelope) and it has definitely made me more mindful of what I am spending and how much and where. We know we have saved money using a cash system, no question.
As a stay-home mom, this is one way that I really feel like I am contributing to our financial success, since I don’t actually earn the money. Also, we talk about what we are going to spend each month, so he is more aware of our food expenses and so on, and less likely to question my spending. And, my kids don’t think we can just go to the bank and get money, at least not as much. They see me pay cash for eating out, for groceries, etc. and realize that there is a finite amount of money available (I think).
In December we did not get around to doing our monthly budget and never took out cash and it was astounding to see how much more we spent. Granted, it was some Christmas shopping, but a lot of it was just impulse buying and overshopping on groceries and so on. Cash has worked for us!
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jolyn Reply:
January 26th, 2010 at 10:15 pm
That’s exactly the kind of testimony I’ve heard from more than one direction — “never getting around to” pulling out cash, and seeing a definite difference in spending habits.
I totally agree about the SAHM thing. This is how I “earn” my money and contribute to the household.
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No, it can’t be too bad at all! That’s about the same time as what we expect, too
Unfortunately, that’s just the end of our “consumer” debt…
It’s coming soon, I pinky-promise
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Hey lady!!
I thought I’d weigh in with our unsuccessful attempts at cash only. We just use cash for our *allowance* if you will. But, with groceries and gas, etc I have found that it’s easier for me to use my debit card. It’s basically cash. I know Dave’s philosophy on it, that we’re more emotionally attached to cash, but I never felt that way.
Breaking a $20 is the same as breaking a $50 for me (not that I’d have a $50 anytime). So, I know I would NEVER spend $50 willy nilly so we use the debit cards. And, it can’t be too bad considering we’ll be out of consumer debt come March!
I think credit is ok as long as it’s done responsible. Which means paying it off each month in full. You can earn benefits that are pretty decent with cash back rewards and programs. That’s the only downside to Dave’s plan – he doesn’t account for responsible credit usage.
Can’t wait to read more (and I want that guest post too
.
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jolyn Reply:
January 25th, 2010 at 9:10 am
No, it can’t be too bad at all! That’s about the same time as what we expect, too
Unfortunately, that’s just the end of our “consumer” debt…
It’s coming soon, I pinky-promise
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We’ve been on the cash system (Dave Ramsey financial course) for about 6 months and love it. This is the first time that we feel in control of our finances and I truly think switching to cash for our variable expenses each month is at the heart of that. It is too easy for us to just swipe the debit card and think that the small purchases won’t add up to much….and we all know that they do. We use cash for groceries, gas, clothing, entertainment, and future savings categories: vacation, insurance, and car repairs/replacement. It works well for us to actually see our spending when the envelopes dwindle and more importantly to see our savings over time. For example, we just used our car repair envelope for the first time. We had been planning ahead and saving each month, went to pick up the car, and paid cash. A car repair has never been so painless! The system really works, but it does take discipline from both husband and wife. In my opinion, the rewards far outweigh the sacrifices.
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jolyn Reply:
January 23rd, 2010 at 11:01 pm
So you’re taking FPU? I really want to take that someday soon, but it needs to be when my husband and I can take it together. I think your last point is key: husband and wife need to be on the same page. If not, one of them is going to be very frustrated.
So exciting to cash-flow car repair! Right now our “entertainment” is part of our individual blow money — even for the kids, I just take it out of my cash. In the future that will change…
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My husband and I each get $50 a month for blow money (but, you know, I call it FUN money! LOL!). Today we went out to run errands and he decided to spend his money on toys for our boys and some stuff for the fish tank and some soda. Typical daddy things, except now he is all out of his fun money. He KNOWS that he doesn’t get any more. (Secretly, I think he’ll dip into his gas money!) So far, I’VE been great with the cash, and DH is totally on board, but it will be interesting to see how he handles the rest of the month (since our months start on the 15th).
I think the debit card situation that Tea describes (above) is brilliant for people who live in urban areas or who are concerned about carrying cash.
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jolyn Reply:
January 23rd, 2010 at 10:37 pm
Oh, my, you do have a lot of month left! We, too, find ourselves using our blow money for other things: kids, etc. Our blow money amt. is still a month-by-month thing. After our renters left, we lowered it. Now he’s deployed, so we’re still trying to figure out how much $$ he needs to have there. (Truthfully, we’ll probably never be able to predict it.) But we’re on the same page about our goals! So it’s all good
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I am a fan of cash. Yes, it tends to burn a hole in my pocket as well, but when I get my $100 for the week every time I break a twenty it hurts! So I definitely spend less with cash. Our biggest hang up is remembering and going to the ATM before our shopping trips! Side note, we’ve been on the cash system for a year (besides the weeks we forget and just use our debit card) and I still only have one category for the variable spending each week, $100 for grocery, gas, and anything household. It’s tight some weeks, but it is getting the debt down!
Thanks for you blog and be encouraged, we’re all in tis together!
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jolyn Reply:
January 23rd, 2010 at 4:08 pm
You budget $100 for grocery, gas, and household altogether? Or for each?
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Heather Reply:
January 26th, 2010 at 12:06 pm
All together! I will feel like a very rich woman when we are out of debt!
Of course, it does help that I coupon, hubs and I carpool to work (5 minutes away) and it’s just the two of us (for now!)
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jolyn Reply:
January 26th, 2010 at 1:28 pm
Ah. I admit, I was scratching my head trying to wrap my brain around that figure.
I use cash for groceries, toiletries, and spending money. I definitely, absolutely think that I spend less when I use cash…it’s possible with a debit card, but easier to slip than when you only have a certain amount of cash in your hand!
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Just started with this challenge January 1, 2010. So far so good. I found your blog through $5.00 dinners. I am going to share it with my 22-year old daughter who is also a military wife with a 17-month-old and a rental in North Carolina. They are moving into their new home in South Carolina in about 6 weeks. Startling similarities except DSIL wants to have rentals. My DH and I are also reluctant landlords after building a small house where our OD went to college thinking we would sell and the market fell there too. Luckily we have good renters, but only through this school year. Then we will have to make some decisions too. I am looking forward to catching up and following your blog. Thank you and your family for your service to our country.
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jolyn Reply:
January 23rd, 2010 at 4:07 pm
The thought that came to me when I read your comment was about how my husband w/come home talking about other officers buying a house wherever they lived and renting it out when they moved, collecting houses at every duty station. Like it was so easy…
I w/just urge your DSIL to really look into the financial aspect of this to make sure they really know what they’re getting into; certainly, if they have debt or if their finances are otherwise not solvent, that s/be their focus before acquiring property.
Are they familiar w/Dave Ramsey? Or his Financial Peace University? There’s also a military version, though I imagine either one w/be beneficial. (I have not yet taken either:(
Good luck on your challenge! W/love to keep hearing how it goes…
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Cheryl B. Reply:
January 24th, 2010 at 9:21 am
Exactly Jolyn, house at each post thing! However, Marines do not have as many places they can be transferred. San Diego, Hawaii, Yuma, and Quantico are about it, unless he becomes a recruiter.
DD said she would listen to a Dave Ramsey book or CD and I meant to order during his sale around Christmas, but never got around to it. I need to get on that!
We have $100.00 to last the rest of the month for everything but gas. This first month has been a success!
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jolyn Reply:
January 24th, 2010 at 12:04 pm
I’m sure your DD could find the book at the library, although it w/be good to have your own copy as it contains sections to write down your own info.
They can also listen to Dave online, which I find very beneficial, just hearing other people’s stories. It gives me perspective and leaves no doubt as to DR’s position on debt, credit, etc. His website daveramsey.com has archives for his radio shows. You can also find his tv show on hulu.com. I link to these on my blog’s nav bar under “linky-linky”
Marines, huh? So he will probably deploy a lot if he stays in? That presents other challenges vis-a-vis rental property from afar… Your DD will likely bear the brunt of managing that “business”, if that’s what they get into. And they need to be prepared to cash-flow months at a time between tenants, should that occur.
That’s all for now!
Congrats on your first month’s budget! Ours didn’t fare quite so well…
Yes! I have always said that cash burns a hole in my pocket. That’s why budgeting is key – otherwise cash spending really makes no sense, because at the end of the day you have no idea where it all went.
I think every one needs a little “blow money”, which is what I would use to buy candy (if I were a “sugar popper” like my husband) or that splurge for fast food/spur of the moment drive-thru weakness, etc. That way you agree with yourself on how much should be allotted for stuff like that, and when that cash is gone, it’s gone. (At least, that’s the idea
That might help alleviate the guilt factor, while not taking away from the benefits of using cash
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We do much better when we are using cash. We take our calculator & make sure we are going to come in a little under our budget including tax. The fear of not having enough money to pay for our groceries at the register is enough to make sure we are under budget. We have tried it both ways & have found that with the debit card, it is easier to put an item or two extra into the cart & aren’t as worried about making sure we stick to the budget like we do when we use cash.
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jolyn Reply:
January 23rd, 2010 at 4:00 pm
Exactly!
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Hello – First – thanks for your blog, I really enjoy reading about finance and the things that work for others and how to do better for myself and family!
I have done the envelope system for 18 going on 19 years and it has worked wonderfully for my family. I started 3 months into my marriage when I found that we were spending every penny of our income from the checkbook and then here came the car insurance bill and I panicked. Then I decided the best way for us was to divide all the bills up into 12 months – insurances, gifts, newspaper bill, car licensing, ect. and put that amount into an envelope each month, then I have envelopes for food and our monthly generals as I call them (toiletries and such). It has saved my sanity because now when the car insurance comes I just go to my envelope and the money to pay for it is there and I just pay the bill. Also, I have us on a budget of $325/month for a family of 4 for our food with the envelope cash system and I rarely go over and lots of months have money leftover. We eat very well, if I do say so myself so we aren’t starving on that budget either.
The way I got my husband to work with the envelope system was he was given an allowance each month and that was his to spend on whatever he wanted and when it came to buying groceries, we always did that together weekly or I would just do it by myself when I needed something quick.
Just throwing my 2 cents out there.
Jennifer in North Dakota
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jolyn Reply:
January 23rd, 2010 at 3:59 pm
Your system sounds a lot like what Mary Hunt advocates with her “freedom account” — the idea being that you free yourself from worrying about those irregular payments that come up once or twice a year by putting the money aside monthly. Except it sounds like you’ve been doing it longer than it was Mary Hunt’s system?
We just started having blow money a few months ago, believe it or not, and my husband was really enjoying it, too. The challenge with our grocery bill is that I will work hard to stick to a budget, but my husband w/go to the store to stock up on lunch stuff, etc, during his lunch hour at work, and I wouldn’t know what he was spending and vice versa. Cash should help us with that.
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I find I spend more frequently when I’m carrying cash.. I’m much more likely to stop at fast food or a gas station for candy, because I won’t see the guilt of it on my bank account the next day.
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jolyn Reply:
January 23rd, 2010 at 10:30 am
Yes! I have always said that cash burns a hole in my pocket. That’s why budgeting is key – otherwise cash spending really makes no sense, because at the end of the day you have no idea where it all went.
I think every one needs a little “blow money”, which is what I would use to buy candy (if I were a “sugar popper” like my husband) or that splurge for fast food/spur of the moment drive-thru weakness, etc. That way you agree with yourself on how much should be allotted for stuff like that, and when that cash is gone, it’s gone. (At least, that’s the idea
That might help alleviate the guilt factor, while not taking away from the benefits of using cash
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Our Lives Reply:
January 26th, 2010 at 12:52 am
That’s funny Jolyn! I used to say the same thing about cash burning a hole in my pocket!
Since I don’t have a lot of extra money to blow, whenever I receive cash gift from my wonderful in-laws, I would immediately buy some gift cards of the places I like to visit (i.e. Starbucks), that way, I could keep on with the cash envelope deal without feeling deprived.
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The best thing I ever did for my grocery budget was switch to cash. The weeks when I’m late going to the ATM are the weeks I overspend. Now, I just need to get Hubby to remember the cash for his little trips….
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jolyn Reply:
January 23rd, 2010 at 8:38 am
I think that’s going to be our challenge, too.
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Since I live in an urban area and take public transportation to shop, I am not comfortable carrying much cash on me. So I do use a debit card to shop, although this debit card is tied to a separate checking account, than my general account. This a free account from my bank. I do keep a $50 dollar cushion in this account, but otherwise the only funds in it are the ones that I can spend that day. I go online and transfer the funds from my primary account into this account before I go shopping. This is the only card I carry when I go out, leaving the others home in the safe. I do this not just to control my spending, but because if my wallet is stolen the thieves will have very limited access to my funds, and I still the card from my main account to use while the bank cancels and replaces the stolen card.
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jolyn Reply:
January 23rd, 2010 at 8:09 am
I think this is brilliant. Especially since the account charges no fees.
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Thanks, Kristen — that’s my prediction, too
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just my little opinion~ cash only=less spending!! definately keep with the cash! we have now been on the cash only system for almost 2 1/2 years and I think it has absolutely made a huge difference for us! Though I can stick to a budget with a debit card… I still do sooo much better with cash… even now after this whole budget thing is engrained in my behavior patterns, I spend more with a debit card-even if it’s only a little more!!
good luck with the cash thing… I think you will like it after you do it for a while
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