My husband and I recently had a financial wake-up call. We realized our debt-to-income ratio was spinning out of control, and we only had $50 in our savings account. I’d had enough of the heart-racing anticipation that came with every Monday before payday, hoping we would make it through the week without over-drafting. We were spending too much of our income on eating out, or on runs to QuikTrip. Our bills were hitting us at seemingly-random intervals, and it felt like no matter how many lists I made, I always missed one or two that would put us over by the end of the month. We had paid off our credit cards in the beginning of March, and by the end, had already racked up more debt.
I woke up one day knowing I’d had enough, and began furiously googling side hustles, ways to save money, and grocery budgets. Amidst my searching I was reminded of a method I’d used in college that worked well for me as a single person on a student income, but for whatever reason, I had abandoned itwhen I graduated and got a “real” job.
Enter: The Cash Budget.
The logistics of this budget seem easy enough to master. You spend the cash you have, and nothing more. Some people choose to take all of their money out in cash, and pay all of their bills using cashier’s checks, or money orders. Some choose to track their spending as if they were paying cash, but continue to use their debit cards. I decided on a healthy mix of the two. I knew deep down, that no matter how careful we were to only spend our slotted funds, using a card was not going to work for us. We’d eventually slip back into the “it’s only $5 more than I planned” mentality.
Essentially, we budget cash for personal spending, groceries, and dining out or date night. The rest of our bills are automatically deducted from our checking account, and anything left, come next payday, is either moved over to savings, or redeposited from the cash funds.
We’ve only been working with this budget for a few weeks, but I’ve found there is a steep learning curve when you change your spending habits drastically.
The first lesson I learned was that spending cash feels different than using a card. I went grocery shopping right after payday, and managed to keep our list under $50. The total came to $47.65, and when I pulled out the envelope of cash to pay, I felt my stomach drop as I handed the cashier our fifty dollar bill. It prompted me to think about how when I use my debit card and manage to keep groceries under $50, I’m proud of myself. Hell, a trip under $100 is a good trip. Whatever it is, handing over that fifty, and knowing that I no longer had it in my possession, was almost painful compared to the numb swipe of my debit card.
The second lesson we’ve learned as a couple using this method is that coordination is key. If you don’t have your envelope, or the wrong person kept it in their wallet, it’s that much harder to get the things you need done. This weekend, Kyle and I had to verbally confirm that one of us had the dining out envelope before leaving the house — every time.
Another lesson that I learned was that our spending habits as individuals are very different. Kyle blew through his personal allowance in the first two days. He did spend a majority of his fund on a haircut, but then chose to buy bubble gum, new tennis balls for our dog, and a few other random things. I managed to save my personal fund, and honestly would not have spent any of it I didn’t have some extra activities planned with my visiting parents. I bought snacks for the baseball game we attended, and covered Kyle’s drink and some appetizers after a pick up catering gig I worked for extra cash. To be fair, I had earned an extra $50 for working that pickup shift, and felt comfortable grabbing drinks afterwards. It was eye-opening to see out purchases separated out like that. There was something about having actual cash to spend that stopped me from grabbing lunch at work, or making that pit-stop at QuikTrip on the way home. I didn’t like seeing the green in my wallet shrink. Kyle spent most of his fund on a necessity, and felt fine making that purchase, even though it meant most of his two-week allowance would be gone.
One of the most important things I’ve learned on this budget is my attitude towards money and spending. I don’t NEED to spend as much as I earn. Kyle and I both work full-time and make decent money for the city we live in, but most of our income could be going to savings. Before taking the plunge with this budget, if we had money in our checking account, we would spend it. We worked within a cycle of feast and famine, where payday would include a fancy date night, or multiple activities, or a large grocery run with one (or four) too many “treat” purchases. After payday, we would pay our bills, and be left with a pitiful amount of money to survive on until the next direct deposit. No matter how many times we did this, we never learned. Using cash and seeing it disappear has caused me to think ahead, and mentally take note of the things I am committed to, as well as the things I would like to do. Knowing that I’m done spending when the cash runs out, as well as keeping a savings goal in mind, has helped me hang onto that $100 bill in my wallet, and avoid situations where I know I’ll be tempted to spend.
All in all, I feel more in control of our finances, and I like seeing our savings get boosted — even just a little at a time. I feel more secure in knowing that the bills we are committed to will clear, and we won’t accidentally spend too much at the grocery store and throw off our entire budget. We’re paying down our credit cards, and part of that savings goal includes not touching them afterwards. I hate seeing large chunks of our budget going to loaned money that we can’t even remember spending.
For us, transitioning to a cash budget was a relatively easy decision, even if the logistics get a little muddy sometimes. The peace of mind that comes from knowing this paycheck-to-paycheck cycle will be broken soon is well worth the momentary disappointment when I realize I don’t have enough cash on me to throw that extra bag of Cheetos into the grocery cart.
Hannah is a recovering binge spender, aspiring novelist, and baked goods aficionado. She dreams of being a stay-at-home dog mom, where she can spend her days writing and drinking copious amounts of coffee.
Image via Unsplash