This and That

Money Monday: Cash On Hand…Really?

Posted on: August 22, 2011

For seven years a running joke with hubby and I was that we never had cash on hand. Never. Our wallets were used to hold our debit cards, credit cards, CostCo Cards, and library cards. Even my change pocket never had coins in it. We used to joke about not knowing what real cash even looked like anymore.

We never carried cash with us because it really isn’t necessary these days. Every shop, restaurant, gas station, and grocery store takes debit cards and they of course take credit cards. But we have learned that just because something isn’t necessary doesn’t mean you shouldn’t do it. It doesn’t mean it’s not the right thing to do.

When we first got serious about getting control of our money, we wrote out a budget (which I talked about last week) but a budget isn’t enough. As the saying goes, the road to hell is paved with good intentions.

We had a budget and each spending category had a monthly number assigned to it. We made a verbal commitment not to overspend.  And yet within the first weeks of the first month we were already overspending. Why? We were using our debit card to pay for everything.

It is VERY easy to overspend with a debit card. You can just swipe and go. Two dollars over here, five dollars over there. Though these are small amounts they were still taking us off our budget and over the course of a month combined into a huge overspent total.

The budget wasn’t enough. Having a budget but using our debit card wasn’t working. It was too simple to get off track. So we implemented the Envelope System.

The Envelope System is actual envelopes, or in my case a small file folder, where you put the cash you have allotted to each spending category every month.

As you can see in the picture, I have labeled each category in my budget (food, entertainment, medical, misc, etc.) And each slot has cash in it for the month.

For example, I have one hundred and seventy dollars budgeted each week for groceries.  So at the beginning of the month or with each paycheck, I will go to the bank and withdrawal one hundred and seventy dollars for each week of the month and put into my food envelope. When I go to the grocery store I only bring that one hundred and seventy dollars with me. That’s all the money I can spend. I can’t overspend because I don’t have any other money with me. No debit card, no credit card, nothing else. As I shop I carry a calculator with me and add up my total as I go. Before I get to the checkout I know how much my food will cost me. Same goes for medical expenses, clothes, date nights, and the miscellaneous expenses. Each has a specific amount of money and once that money is gone I can’t spend anymore until the next month.

I know it sounds hard core to a lot of us but people have been doing this for years. It’s only recently that our culture has stopped tracking it’s spending and has stopped using cash. My mother has always handled her finances this way and once I did my savings went from four hundred dollars a month to eighteen hundred dollars a month! Seriously!

If you are serious about saving more and getting control of your spending, first you have to write a budget and commit to following it. And second you HAVE to do the Envelope System.

I would love to hear your thoughts on this. Comment and let me know your thoughts on this old fashion, radical way to manage money

PS: Paying with cash is also a lot of fun because every checkout clerk looks at you like you are crazy to be paying with cash. Sometimes it seems like they aren’t sure how to make change anymore. HAHA!

PPS: There are only two categories that aren’t a part of the Envelope System and that is tithing and gas. Tithing is actually taken out of hubby’s paycheck every month and gas is used with the debit card because gas is something that can fluctuate every week for us and must be purchased when needed.

Besides my mother, I got my tips and advice on using the Envelope System from Dave Ramsey at I am no way affiliated with Dave Ramsey. He has no idea who I am and I have never had the pleasure of talking with him. I just like listening to him on the radio and reading his website.


8 Responses to "Money Monday: Cash On Hand…Really?"

Fabulous tip! My husband and I are about to do an entire overhaul on our current non-existant budget (haha) and this will be a great (though very painful) way to stick to it. Against my better judgement, I am forwarding this link to him. I’m so sorry Target.

That is truly the hardest thing for me- not going into Target and not eating out! But it gets easier once u see how much money u are saving because of the sacrifice!

I’m looking foward to seeing our nest egg grow, but am really really super duper sad about Target. boo.

Hope more people try the envelope system. Thank you for the Dave Ramsey web site – I will take a look. Everyone needs all the help they can get.

Great points, Jami. Before the great depression…we were card-dependent too – debit/credit. You know, Typical. These days we carry ONLY cash and pay in CASH. It is definitely a better way of tracking a budget. Another tip — when the paycheck comes – divide into three – SPEND, SAVE and SHARE. That’s something I got at a MOPS talk – I forgot who gave the talk.

Oh that is a great tip! I’ve heard that before too! Love it!

I’m loving your blog! We are trying to get back to the basics after well being reckless with money. Last month we went $2700 over budget and spent$1100 on eating out. Crazy right! We are trying Dave Ramsey and are going to do the cash envelope system. I’m so done with our current lifestyle and want to simplify. Keep up the work mama on the blog! I love it!

Oh my gosh- isn’t crazy how fast all the extra spending adds up! With going out to eat, over spending at the grocery store and going to target all the time we would throw away $1400 a month consistently!! It’s hard to change spending habits but it’s so worth it when you see your savings go up and up and up!!!

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