We Use a Cash Budget and You Should Too

Do you find yourself at the end of the month checking your account and asking yourself the famous question “Where did my money go?”


Yeah, don’t worry we all been there. What stopped us from asking that question is going on a cash budget.

The basic explanation of a cash budget is to operate/track your spending with cash only. We found it as a great budgeting tactic to keep track of how much we spend and more importantly limit the spending. In addition, it helps you to stay away from credit cards, to discipline yourself and to scale back spending.

For the past few months we have been operating on a cash budget for our spending outside of bills. We use $500 cash for food and gas each month. The regular bills (rent, student loans, internet etc…) are still being paid through our bank account and tracked by Mint. The idea of a cash budget came from Dave Ramsey and our realization that we spent too much on fast food and entertainment. Now our fast food and entertainment is paid by one of our personal accounts, where we delegate 10% of our individual’s paychecks for personal spending.

It’s a lifestyle Change

Working on a cash budget worked amazing and transformed how we purchased food. Before the cash budget we used our debit card and never realized how much money was being spent on groceries and restaurants. Making little trips to the grocery store often and eating out way too often put a hurt on the wallet. Skip to the present and we are more conscious of where our money goes. I figured it saved us around $200 a month. We learned to plan ahead of a grocery trip and still working on the coupon thing. I suggest a cash budget for anyone. Most months we have money left over where we either save it or treat ourselves out to lunch. So for us it works best for food and gas but I imagine we will start using cash for entertainment since we moved to Atlanta.

Why should you use a cash budget?

I can give you several more pros and cons about how great it works. But you only need to know one reason. It gets RESULTS! If you read this far it means you are ready to make some changes to your spending and want results as well. Trust and believe a cash budget will get you just that. Operating on cash is a crash course into budgeting. When you run out of food cash in the middle of the month there is no other money you can spend. Whether you have too much or no cash at the end of the month you will get the result you want with careful planning.

I broke it down into a few simple steps on how to get started, I promise it’s easy as 1-2-3. Keep reading and get started!

Step One – Budget Realization

The first step is always the hardest. You need to pick what areas, if not all, of your spending you are going to limit with cash. Areas can be broken down such as: Bills, Rent, Food, Gas, Savings and Entertainment. If you have a special area you want to limit then just write it down. Once you have the areas that will be operated by cash write each one down on an envelope. Try not to use anything else, as an envelope is easy to hide from others.

Image result for cash budget envelopes

Step Two – How Much

Up next you need to determine how much cash goes into each envelope. We used www.mint.com to track our past spending to give us a direction of where we were and then we figured where we want to be. If you want to only spend $250 a month on food then move the money to that envelope. Don’t forget to challenge yourself or this won’t work. You may know that you can operate on $100 in entertainment cash but you can save more by limiting that cash to $80. A few bucks go a long way.

Step Three: Consistency

Success doesn’t come overnight no matter who you are. Applying consistency is the key to make a cash budget work effectively. After the first month you may found you need more or less cash and that is normal. It takes time to find that sweet spot but when you get there it feels good! Don’t give up on this type of budgeting; it really does work in time. Each month adjust the cash in each envelope until you find your sweet spot. Be consistent and see how your spending changes for the better.

Three steps to better controlled spending is easy right? Well, easier said then done. But get started right now. Find some envelopes, a pen and fill each one with your monthly cash allowance. Give it a six month trial and come back to let us know how it goes!

Please subscribe at the bottom of the page to receive all updates on The Millennials Next Door.

Sign up for my FREE 10 day course to create your blueprint to financial freedom


Learn how to make a blueprint to your definition of financial freedom.

Powered by ConvertKit


Leave a Reply

Your email address will not be published. Required fields are marked *