Paying with cash is quick and easy. Cash doesn’t acquire interest and is an instant reminder of the money available, without having to remember to update your bank register with every purchase. It helps to use cash when paying for things like groceries, gas, clothing, vehicle maintenance, supplies, and propane. Credit cards should be used sparingly, due to the interest rate, but not avoided due to credit scores. By paying with cash for everyday small purchases you can avoid increased debt. Instead, save credit cards for larger items or for months before taking out a loan, but make sure you have money saved up to pay off the balance.
An easy way to keep track of your budget when using cash is labeled envelopes. Let’s say after paying bills you have $700 remaining to budget for food, gas, and other expenses. Determine how much you spend for each item throughout the month (i.e. $400 for food, $200 for gas, and $100 for other expenses). Next, label an envelope for each category and write the amount budgeted on the envelope. Place the budgeted cash in the labeled envelopes. When you get change back, put it back in the labeled envelope you took the cash out of. At the end of the month use half of the cash remaining to pay off debt and the other half to increase your savings. To help increase the money saved, set goals for how much cash you want left in each envelope and write that on the flap as a reminder to determine if your purchase is necessary.
When budgeting your cash in the envelopes, be as specific as possible. I have basics like groceries, gas/diesel, and dog food, but I also have cash budgeted for future needs such as my property tax and 6 month insurance. The future envelopes get added to each month, saving up for the total needed; or if you are good at keeping up with your bank register, deducting these amounts from your register allows the money to accumulate in the bank.
By paying with cash and using labeled envelopes, you can control your finances and keep an eye on your budget. What are your budgeting tips and ways that using cash has benefited you?
Tip: If you have trouble keeping paper envelopes in order (they rip or get lost) try an envelope wallet. You can get a cheaper oilcloth cash envelope wallet or a beautiful cloth envelope wallet, like the one I use from CitrusDesigns on Etsy . But they will keep your cash organized and help you maintain your budget.Google+