Trying Cash Only Plan

[Anonymous]

I'd like to start saving more money, after a year of bleeding money (new house, furniture, car, etc). One thing I read over and over is to use the 'envelope system' where you put cash out each month by category & spend only what you have. This seems like a great idea in theory, but I'm stuck in making it a reality

90% of our non bill (e.g. mortgage, utilities, day care) goes on a single credit card (yes, we pay it off each month). That's where the cash would come in handy - it's our biggest, variable, expense where we could cut back.

I've tried looking at the statements to see what categories we'd need, but it gets overwhelming, a lot of "oh yeah, we needed a new rug for the mud room to protect the floors" and "we paid for catering at the family reunion"

Looking at the nifty pie chart my card company provides

30% Merchandise (includes christmas)
18% Supermarkets
8% "Services" (including UPS, hair cuts)
8% Gas stations
6% Travel
5% Sam's club
3% Restaurants
Rest - medical, education, automotive, government services (passports)


I get that groceries/sam's club and restaurants can be cash, and we can save up for travel, but struggle with the rest. I buy a lot of our stuff (diapers, face cream, bday gifts) online. Gas just doesn't make sense either, and when the kids need a haircut or I have to mail something, it's not like I can wait a month till there is cash in that envelope.

There aren't any 'easy' spots to save. We don't drink starbucks, rarely eat out, bring lunches, low cell phone/cable plans, shop sales, etc.

Does anyone use a cash budget? How do you make it work?

Other suggestions for savings

[Anonymous]

We just started an all-cash plan for the next two months. But we did not use envelopes. We are using it as a way to be mindful, and track what we spend in an effort to develop an accurate budget at the end of these two months.

Basically, we calculated how much cash we would have each month after deducting bills and automated savings (which we upped significantly). We then withdrew that whole amount from the bank and split it between the two of us. Each time we spend anything, we log it into a shared spreadsheet- the date, amount, what it was and a general idea of what "category" it might fall under. This method allows you to pay for that postage or haircut, but with the consequence that there wil be less money to go around. At the end of the two months, we'll hopefulyl have spent less money, and also have a very clear picture of where our money is going, beyond general categories.

As an aside, we bought a new house this year and found ourselves spending tons of money on things we "needed" for the new house. I evantually realized that alot fo the stuff (area rugs, window treatments, patio furniture, towel racks) really could wait until I had saved for them. Now, we have entire rooms with nothing on the walls because I cannot afford to buy artwork. I'm OK with that. It is a "want" not a "need." I'm not saying you are inth e same boat, but thought you might be.

[Anonymous]

Try a program called You Need a Budget (YNAB). It is essentially the envelope system, but it is a computer program and app, linked in the cloud, so you can enter and categorize your transactions and check how much money you have in each "envelope" as you go about your day. Your categories (or envelopes) wouldn't be "Sam's Club" but Groceries, or/and "Household goods." When you get your paycheck you allocate every single dollar of it to a category, including things like emergency fund, discretionary, whatever, and then you know how much you have. You can move money from one category to another if you need to. It has kept my family in the green for about a year now, and we always struggled. A real keeper!

[Anonymous]

I found that anytime I had cash in my wallet, I just spent it. It was a novelty to me as I rarely have it.

[Anonymous]

OP and 8:57, we are the same. I am inspired to try this!!

[Anonymous]

Budgeting by category seems silly to me. Are you really going to not pay the electric bill because you're a dollar short in that envelope and you're $100 over in the "entertainment" envelope?

[Anonymous]

We used monthly envelopes. It's used for spending that's highly discretionary, not fixed liked utilities. We had Groceries, Entertainment, Work Lunches. I don't remember all the categories. We borrowed between envelopes quite often by the end of the month. I didn't really like having all that money (cash) in the house. I do think it mattered. We spent less. There was something about physically handing over the cash. And you could empty the envelopes and count it. We were newly married but that was a long time, technology-wise, ago.

[Anonymous]

What do you do in a situation in which most of these discretionary purchases are made online? Tickets, kids' birthday presents -- almost everything except lunches we order over the internet...

[Anonymous]

Anonymous wrote:Try a program called You Need a Budget (YNAB). It is essentially the envelope system, but it is a computer program and app, linked in the cloud, so you can enter and categorize your transactions and check how much money you have in each "envelope" as you go about your day. Your categories (or envelopes) wouldn't be "Sam's Club" but Groceries, or/and "Household goods." When you get your paycheck you allocate every single dollar of it to a category, including things like emergency fund, discretionary, whatever, and then you know how much you have. You can move money from one category to another if you need to. It has kept my family in the green for about a year now, and we always struggled. A real keeper!

A friend of mine used that program and really embraced it. She says you have to get in the habit of looking at your bank account through YNAB and not just logging in to your bank's online account.

[Anonymous]

Anonymous wrote:We just started an all-cash plan for the next two months. But we did not use envelopes. We are using it as a way to be mindful, and track what we spend in an effort to develop an accurate budget at the end of these two months.

Basically, we calculated how much cash we would have each month after deducting bills and automated savings (which we upped significantly). We then withdrew that whole amount from the bank and split it between the two of us. Each time we spend anything, we log it into a shared spreadsheet- the date, amount, what it was and a general idea of what "category" it might fall under. This method allows you to pay for that postage or haircut, but with the consequence that there wil be less money to go around. At the end of the two months, we'll hopefulyl have spent less money, and also have a very clear picture of where our money is going, beyond general categories.

As an aside, we bought a new house this year and found ourselves spending tons of money on things we "needed" for the new house. I evantually realized that alot fo the stuff (area rugs, window treatments, patio furniture, towel racks) really could wait until I had saved for them. Now, we have entire rooms with nothing on the walls because I cannot afford to buy artwork. I'm OK with that. It is a "want" not a "need." I'm not saying you are in the same boat, but thought you might be.

OP again - I've had that same realization. We have empty walls, rooms with out area rugs, etc. My fear is that if we don't start saving more money, we won't get to a point where we can get those things!


Thanks for the suggestions.

And for us to, much of our spending is done online. if we took cash for just eating out and groceries, I feel like it wouldn't make much of an impact on our overall big picture.

One challenge is that most of my "discretionary" spending - the spending that drives the credit card bill up each, and every single month, doesn't seem discretionary. Yes, I can probably do better about getting some of the stuff cheaper (amazon is super easy, but not always the best price), but it's not like I can skip most of the stuff. I think I just need to be better about planning for it - I check the online statements daily, and yet somehow it always hurts/is a surprise/disappointment when it's time to pay the bill and it's higher than I expected.


could be a financial planner could help with this; but that's another expense!

keep the suggestions coming!

[Anonymous]

I am not sure you need a financial planner for home budgeting. My husband and I sit down in Early January and develop our budget for the year. Our categories are pretty broad such as groceries, gas, mortgage, insurance, house repair, etc. and we allocate a number for the year and x-cel will break it down to a per month number. In late June we look at it again and rejigger as needed.

[Anonymous]

I find that the only two categories we have any foexibility on are food and "shopping." We try to keep food to $1000/mo and are able to do that by bringing lunch to work more often than not.

[Anonymous]

Anonymous wrote:I find that the only two categories we have any foexibility on are food and "shopping." We try to keep food to $1000/mo and are able to do that by bringing lunch to work more often than not.

Yeah, this is kind of what I feel like. I can't move the numbers around on most of our stuff, shopping and food seem like the only candidates. Now that I've cut out the house shopping, even the shopping category is pretty slim.

I decided to go on a no-spending (except for gas, groceries & utilities) plan for a month, write down everything I wanted to buy but put off, and see if that helps me figure out what really is discretionary.