Using a Cash Budget
I wrote about this a few weeks ago on my blog, and it's an idea I wanted to share here with our Frugal Living readers as well. We all struggle with sticking to our budgets to some degree or another. Here's a solution that our family has found that works really well to keep a lid on the “little things” that tend to add up so quickly.
For nearly a year now, Hubby and I have been operating a cash budget for our family spending. We had been having quite a bit of trouble sticking to any sort of budget; even with the watchful monitoring of Quicken, we tended to go over budget by several hundred dollars every month. At one point we'd tried a cash budget, but with no record of where the money went, it was a mess.
Finally, I found the solution: a coupon file that could double as a wallet. We categorized the cash, and divided it between us based on what we normally buy (Hubby puts gas in the car, and I usually pay babysitters), and we allowed for things like coffee or treats for the kids. In each of our files, I set up categories like groceries, gas, dry goods, personal, dining out, and a miscellaneous file. Then we decided how much we would withdraw each paycheck, and I made myself a note to give to the bank with the correct denominations of bills. Every payday, I withdraw the cash and dole it out to the correct pockets in our files.
I thought this would be an onerous task, but it has turned out to be kind of fun. The bank tellers know me now, and I coaxed them to give me a stack of withdrawal slips, so I could fill one out ahead of time and have it ready. It takes very little time, and feels so satisfying to dole out our allotted cash.
The best part is, we have stuck to our budget ever since! When the cash is gone, it's gone. I'll admit, we've had times when the days leading up to payday have been a bit scanty, but it just hardens our resolve to be more frugal the following week so the money stretches the full two weeks. Hubby and I are both so excited to have success in this area where traditionally we have fallen short.
We still use the checking account for bills, of course, and I occasionally use the credit card for a big purchase, or online spending, but only if I know we can pay it off immediately. So far, the cash has worked splendidly for shopping around town, and it makes us choose our purchases more carefully as well.
If you're interested in doing a cash budget for your family, here are a few tips to keep in mind:
1. As with any budget, be realistic.
Plan for both needs and wants, and use a realistic percentage of your income.
2. Work as a team to plan.
Unless you live completely alone, you have to work with others to coordinate spending. Sitting down and talking about what's important for all parties involved helps go a long way toward making the budget a success.
3. Baby Steps
We budget one or two weeks at a time. It's not safe to carry large amounts of cash around, and it is harder to not spend it all right away if you try to do a month or more at a time.
4. Use a change cup.
We have a coffee mug in the pantry to put all the loose change. It accumulates quickly! to deal with it, you can get paper rolls from the bank and roll it, or you can save it up to buy a treat. Paying for coffee in pennies annoys the barista, though. Just be warned!
However your family budgets, the key to success is to have a self-limiting system, so that you cannot spend more than the planned amount in the planned time. For us, that usually means being careful not to whip out the credit card when the cash is all gone! Still, having the cash is a good eye-opener to at least alert us to overspending, so we can reach our family goals of being more frugal, saving more, and reducing our debt and our acquisition of material goods.
About the Author:
Erin Jepsen is the mother of a multiracial, multicultural, multi-abled family of 4 fantastic kids. She and her hubby live in a small town in Idaho, where they unschool, play Celtic music and promote gourmet coffee. She learned all about frugal living from her farm-wife grandmother, who repurposed everything, back even before it was fashionable to do so. Erin also blogs at A Number of Things.