Benefits of a Cash Budget – Part 1

Benefits of a Cash Budget – Part 1  

Written by Sam

In this article series of articles, I have recorded somewhat of a manifesto for using cash in your budget.

That’s right, I’m talking about using cash in your budget. Using cash in your budget is a tough topic. People shy away from it and toss it aside as being too much of a hassle. I want to challenge you to put those beliefs aside for a moment and let me make a case for using cash.

The fact is, I know how you feel. Using cash in our budget was one of the things I fought against most. We started using cash as part of Financial Peace University. It was one of those concepts I was ready to ignore and tried to convince my wife that we shouldn’t use cash. But she wanted to give it a shot and since I’d agreed to follow the program, I reluctantly went along.

I’m glad I did.

It quickly became clear how powerful using cash in your budget is. I was quickly converted and became a big advocate for using cash. In fact, I now consider it a requisite for having an effective budget. REALLY! I don’t know a single family who considers themselves successful at budgeting that doesn’t use cash.

On the flip side, I know plenty of people who struggle with their budget or struggle staying within their spending limits and are always trying to figure out why. Yet, they resist using cash. They just won’t give it a try. Or they give it a half-hearted try and quickly give up.

How We Saved $6,000 In One Year By Using Cash

So what was the result of using cash for me and Emily? Not only did we stay within our budget consistently for the first time in our marriage, but we actually spent $6,000 less the year we started using cash with no perceived decrease in lifestyle. It was mind boggling that we saved so much.

We saved an average of about $500 a month. We spent less on groceries, ate out much less, and no longer made impulse credit card purchases to the tune of hundreds of dollars a month. But I never would have thought those seemingly little things would make such a big difference in our savings.

The Advantages Of Using Cash

There are several advantages of using cash in your budget, but there are mainly two that I want to emphasize.

First, using cash makes it easy to control your spending and to keep within your budget.

Second, using cash will cut as much as 80% of the time spent reconciling your budgeting at the end of the month. While I’ve already showed you how to speed up your budgeting process, using cash is the thing that will have the greatest single impact in decreasing your budgeting time. My wife and I spend 30-60 minutes a month budgeting. THAT’S IT!

In this article I’ll be addressing the first advantage of using cash.

Before I jump in let me point out that I’m not saying you need to use cash for your WHOLE budget. In fact, there are some cases in which using cash doesn’t make sense. You’ll mainly want to use cash in those categories in which you tend to overspend. This may only be 2 or 3 categories.

Controlling Spending With Cash

The Power of Instant Feedback

Cash is the perfect instant feedback mechanism. It easy to keep from overspending because when the cash is gone, you know you’re done spending. It’s really as simple as that.

Alternative Ways to Track Your Spending

When using credit cards you are totally disconnected with how much you’ve spend and how much is left to spend. Some people try to track their spending by writing everything down in a notebook, but in my own personal experience and hearing experiences of others it’s very difficult to be consistent with a system like that. Inevitably you stop keeping track.

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