We have all heard that “cash is king” and that we should use a cash only budget. I don’t and it’s for a very good reason. Let me show you why I don’t use a cash only budget and why you may want to switch too.
Grab any frugal living book or load up your favorite personal finance or frugal living blogs and while they may all be different, they have one thing in common. The majority will tell you that you should absolutely, without a doubt, be using a cash only budget.
Except, I don’t think that is necessarily true.
In fact, I don’t and I have not for quite a while.
What is a Cash Only Budget?
Before we get to the reasons I think you should not use one, let’s talk about what a cash only budget is. It’s pretty self explanatory though.
A cash only budget is where you use cash for any and all expenses you can. When you receive your paychecks, you separate the money into categories – usually kept in cash budgeting envelopes such as THESE . When the money in your cash envelope is gone, that’s all you allow yourself to spend in that particular category.
The general idea is that because cash is a physical thing you can feel in your hands and because cash is actual money vs a number on an app or website screen, that you will think twice about spending it. In other words, since cash physically represents how hard you work, it makes sense that you would have a harder time spending it.
Seems simple, right? It is. Should work for everyone, right? Sure!
Wait, no. No it does not.
Why You Might Not Want to Use the Envelope System Budget
The simple truth is that budgets are an extremely personal thing and they are not one size fits all. No matter how many folks say they are, it still will never make it so.
There could be any number of reasons that a cash only budget won’t work for you, but I ‘m only going to address one here.
The reason a cash only budget may not work for you is because you spend cash easier than you do a debit card. Does that sound familiar? It sure does to me because that is the exact reason that I do not use a cash only budget.
For me – and others like me – having physical cash in our hands actually works the opposite of making us think twice. If I allow myself, can blow through cash like it’s water and once it’s gone, have no real idea of where it’s gone to. I admitted that in my recent post about how to stop overspending (Six Dollar Family).
Because I know that I will most likely over spend if I use cash, I generally use a debit card budget only.
So How Do You Keep from Overspending with a Debit Card Only Budget if You Overspend with Cash?
Keeping our debit card only budget in check is far easier than trying to manage a cash only budget that I know I am very likely to screw up. But, it must be managed and updated often in order to fully work the way it is intended to.
First, I no longer budget our money month to month or week to week and expect that to work. Instead, I do a monthly income and expense report to ensure that all of our expenses are covered.
If not, I make whatever plans are necessary to earn the extra money. It is rare that this happens, but occasionally life pops up and drains our emergency fund and our checking accounts at the same time.
How to Budget Paycheck to Paycheck
Once my monthly budget is done, I then do a paycheck to paycheck budget. Since we have mixed types of income – mine is irregular while his is regular – this makes the most sense and allows me to keep track the easiest.
If you are not familiar with a paycheck to paycheck budget, you can head HERE to learn what it is and how to create one.
Because my budget is done from paycheck to paycheck, I know exactly what should be coming out and exactly when. There is literally zero guesswork.
There is zero overspending. There is no living paycheck to paycheck (in a bad way) just trying to survive.
And that my friends, is a beautiful thing.