4 Benefits of Using Cash

 

Last week, I mentioned the importance of choosing a method for tracking your spending.  About 3 years ago or so, we started toying with the idea of using cash for our spending money.  I was hesitant at the start because I thought it was far too archaic and not necessary if we were disciplined with our spending.  Who wants to deal with a stupid envelope anyway?

But, as I saw that we sometimes struggled to stick to our monthly plan, I thought it might be worth a try.  We started slow and in the first few months, I just used cash for our grocery budget.  I found so many benefits to it that we eventually converted many of the other categories over to cash as well.  At this point, we use cash for all of our budget categories except for our monthly bills {mortgage, utilities, etc.}, fuel for our cars, and medical expenses.

How It Works For Us

After The Teachers and I have agreed upon the budget for the month and all bills have been paid, I head over to the bank and make the cash withdrawal for the month.  I put the appropriate amount of cash in each envelope and we are ready to go for the month.

I keep the envelopes in a safe place where we can both access them when needed, but in all honesty, I tend to be the one who uses the envelopes the most since I’m the primary shopper in the family.

I posted about our switch over to cash envelopes back in January of 2012, but now that we’re a year and a half into this, I figured I’d post again about the benefits we’ve seen from using cash.

1.  Simpler to track our spending

We can see at any given time what money we have available to spend.  We don’t have to wonder whether we can afford something.  We simply look in our envelope and see if the money is there.  We also have much fewer receipts that we I have to keep track of and much fewer entries on our budget spreadsheet.  We probably spend a little more time on the front end making our withdrawals at the bank and filling our envelopes, but we have found it greatly simplifies our lives on the back end.

2.  We plan our spending better

Since we know that when our cash is gone, it’s gone, we tend to be more intentional with our purchases.  I tend to stick to the essentials more now since I know that our cash is limited.  That’s not to say that we don’t ever splurge, but using cash at least causes us to think through those splurges first rather than dealing with them later.  Spending cash tends to be more “painful” for me specifically, so I try to make sure I really need the items I’m buying or I become even more determined to find things at a great price.

3.  It’s easier to stay on track

Since our purchases tend to be more premeditated, we have been more successful with sticking to our monthly budget.  We sometimes need extra money than what we originally allocated, but those situations seem to be fewer and fewer when we use cash.  I have found that the months when we don’t use cash are usually the months when struggle the most.

4.  Less guilt

As my friends and family can attest, I can analyze things to death.  This obviously trickles down into our personal finances and my spending habits.  When I have cash in hand, I know that I can afford what I am purchasing.  In that moment, there is no wondering whether I will regret it later or stressing about whether I’d be able to pay the credit card bill at the end of the month when it comes due.  If the money is there and I want/need to spend it, I know I can.  I still consider each item carefully, but once I make the decision, there is no guilt or anxiety.

What About When Cash Is Not an Option

There are times when using cash for purchases is not an option.   Sometimes we need to purchase something online {or I need to redeem my Old Navy credit card rewards – ha!} and sometimes we forget to grab the envelope before we head out to do our shopping. 🙂 In those situations, I just make sure to take the cash for the purchase out of the envelope and deposit it back into our account the next time I’m near the bank.

Things to Note:

We are still learning the best way to make this cash envelope system work for our family.  By no means do we have this down perfectly and there are times when I would love to scrap this and go back to our check cards because it seems easier.  But, I have found {and I think Kev would attest to this too} that the effort to make it work for us has been worth it.

There have been months when the cash withdrawal was never made and we used our cards, but those months our spending tended to be more chaotic and uncontrolled so we felt stressed or even discouraged.  And while it’s natural and okay to have seasons like that, we have found that we sleep better and feel more confident in our plan when we are determined to use cash.