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5 Ways a Cash Budgeting System Will Change Your Life

I’m honored to have an article up on today titled 5 Ways a Cash Budgeting System Will Change Your Life.

Whether you’re struggling to stay afloat financially, or just trying to save money and make smarter spending choices, you should consider a cash budgeting system.

In our family, we use cash-only for most expenses, including groceries, gifts, clothing, miscellaneous items and eating out. This means we allot a set amount to each category monthly, then place that exact amount of cash in individual envelopes labeled for each expense at the beginning of every month.

Here are five reasons I’d encourage you to consider setting up your own cash budgeting system:

1. A Cash Budget Gives You Freedom

For many, just the word “budget” has negative connotations. However, a budget doesn’t have to be restrictive. In fact, for my husband and me, it has had the opposite effect — the boundaries of a budget have given us a freedom we didn’t have before. For example, we don’t have to worry that if we buy groceries, we won’t be able to pay our electric bill.

Head on over to to read the full article.

PSST! Want to chat with other frugal folks about ways to spend less this summer? I’ll be hosting a live chat on the All You Facebook Page next Wednesday at 2 p.m. EST and we’ll be talking about how to save money on summer activities and family road trips! 

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  • Alicia says:

    I had a moment last night when I sat down and split up the most recent checks received and almost cried. Not only have I been paying my rent and all bills on time for the nine months in a row (first time in the six years since my ex and I split), I have money set aside to pay my registration, almost enough to get my new set of tires, and half of what I need for our vacation this summer. Most my money issues isn’t because of credit (I haven’t had one in over five years), but I have been horrible at managing money from the beginning of time. Throw in my past manic episodes that had money flying out the door, well, this is a huge deal. I have less than a year until I pay off my car and then I start saving for my moving expenses the following year (and my “six month backup”).

    The best thing? Going to cash and using the envelopes has made this possible, where everything seemed so difficult before. I still have money left to spend at the theater (budget showings) and on a few decks of playing cards or Skylanders (at least they’re cheap hobbies/collections), so I don’t feel like I’m giving up everything. Thank you so much for your suggestions and advice over the last year, it has been the best encouragement yet to make this happen. 🙂

  • jennifer says:

    I totally understand the premise behind a cash budget and why it would be a good system for many, but also wanted to give a shout out to monthly credit card spending that builds up reward points. Yes, you need to pay off every cent every month to avoid fees, and make sure you pay it on time or yep – more fees, but the rewards are such a great bonus! We have a card that allows us to choose our rewards, and earn $100 gift cards to stores like Kohl’s and Home Depot (i.e. places we actually want to — or need to – shop) every 2 months just by buying the things we would buy anyways (groceries, gas, etc.) We have always paid off the balance in full so no interest, and only once were charged a late fee due to a glitch, but the credit card company reversed it. Another benefit is that our purchases automatically feed into the budget tracking system we use, Mint. If there is an overage in one of our budget categories, we both get a text message. We can track our budget down to very small categories due to the automated nature of how our info is collected. This system works for us, and minimizes the danger of losing cash envelopes or have them stolen. We keep our credit card info handy in case cards are lost/stolen, but the companies are quick to turn them off and remove illegal charges. Stories about people trying to find the rightful owner of a wad of cash are few and far between…

    • Stacey says:

      I’ll “second” your shout out! Cash only is great for many, but not all of us.

      • Melissa says:

        On this note, I have to say THANK YOU to the readers on this website who recently recommended EEBA ( for setting up an envelope system of sorts with credit cards, etc. My husband and I set it up (took a while at first, but now it is sooo simple!) It is an electronic app that is linked on both our smart phones- and it is seriously the slickest thing ever. Anytime we go out, we just pull up the app, see how much we have left in our virtual “envelopes”…then if we make a purchase, via cash or charge or whatever, we enter it in (once you have your vendors in, it becomes even simpler since it just pulls them up without having to even type it all in and also uses GPS to pull up vendors near your location). It is sooo nice and we are so grateful to finally have something that works for us. The cash system just did NOT work although we LOVED the concept and wanted to do it desperately, we tried numerous times, but my husband travels for work and we are separate often so we needed something to link us so that we were both aware of what we were spending. You can use eeba with cash or credit, etc. As long as you view your virtual envelopes as literal envelopes, it works perfectly. If you do go over one month (we did once due to medical expenses for one of my children), you can try to scrape by the next (it carries over depending on the “type” of envelope system you set up) when you “fill” up your envelopes virtually whenever payday occurs. I am so thankful as I was super frustrated because cash was just not working for us and was just a mess, we had tried it numerous times. We’re both extremely frugal and so were anxious to find something that wasn’t so labor intensive (I had previously been entering in receipts to a spreadsheet when my hubby would give me his receipts, etc.) It’s also nice because I order a lot of stuff online since I have a 3 year old, 2 year old, and 1 year old at home so it makes it much easier to use a credit card online and have it shipped to my house (I am much more comfortable with that as I’ve had bad experiences with debit cards) as well as using the extra “perks” we earn from our discover card to purchase gift cards for “splurges” and date nights. 🙂 Anyway, thank you to whatever reader it was that recommended EEBA!! I guess it pays to read the comments! 🙂

        • Cheri A says:

          I just started using EEBA also. Love it! 🙂 I was looking for something that would not have access to all of my accounting information like Mint does. It just isn’t comfortable for me. My husband does not carry cash and prefers to use his debit card for most everything. He is not totally on board about using EEBA yet, but I am hoping that he will see the advantages of it soon.

          • melissa says:

            Us, too! We didn’t like that aspect of Mint. We are starting to get the hang of EEBA more- it really has helped us a ton. We were really frugal and careful but this is giving us a lot more freedom. To be completely honest, I wasn’t totally “on board” at first, either. At first it seemed a little messier than what we were doing and I was a little confused by different things. My husband spent a ton of time researching it and has been really patient with me and I’m coming around! I’m starting to see how awesome it is. So be encouraged. 🙂 Hopefully he will come around! I especially love how it tracks everything electronically and we can pull up things and see where all our money is going by the click of a button. LOVE it. 🙂 The only bad thing is it is a little painful to be 100% accountable for every penny I spend…hehe! But I know that is a great thing!

            • Cheri A says:

              I agree with you about it being a little painful to be 100% accountable, but it’s so freeing to come up with extra in my envelopes at the end of the week. I use cash in envelopes and log it in EEBA. Since dh isn’t on board yet, I’m just sharing with him my categories and showing him what it does. Honestly, besides bills, his only expenditures are lunch and an occasional trip to the store on the way home from work right now. It’s really helping me budget my irregular paycheck.

  • Wendy says:

    Great article! I have a dumbish question: How do you work it if you can’t put the whole month’s money in each envelope at the beginning of the month? I get paid twice monthly and I live paycheck to paycheck. I do have a budget, but I think I’d be more successful using the cash method. I just can’t figure out how to do it without some startup funds I guess. If I only put half in at the beginning and the other half at the second payday, what if I needed something in one category (say household) that I can’t wait til the next payday to purchase when I’ll have the full funds? I don’t want to get confused switching between envelopes. I hope this makes sense and you can suggest something. I’m pulling my hair out trying to make ends meet. Thanks!

    • Emilie says:

      when my husband and I started a budget in July we figured out how much everything was going to be for the year and divided each category by 26 so we knew each payday how much to put in. We sometimes had to take from vacation or eating out to cover something like prescrpitons that did not have enough yet. We always took from an “extra or entertainemtn” area. The first two months were really hard and really tight. We stopped doing a lot of things. Now 10 months later we haevg paid down a bunch of debt, built a savings account and have money in all categories. This July we are planning to look at the numbers to make sure that things are adjusted properly! Kepp working at it and it will work. A budget is not set in stone and life happens!

    • Dawn says:

      Maybe you could sell a couple things or offer some babysitting or cleaning for a short time. Use the money from those to give you a cushion in your envelopes to start out with.

      • Jodi says:

        Figure out which categories you need to fund at the beginning, and then mid-month. I pay my mortgage mid-month, so I have extra to fund my envelopes at the beginning of the month. Groceries I fund 2 times per month. Maybe entertainment and haircuts could be put off, but groceries and gifts can’t. Figure out the amount from your check that you have to dedicate to these funds. It should not be more than you can afford to spend. I find that having cash in my clothing and gift envelopes keeps me from using a credit card. Good luck.

    • Wendy says:

      When I quit my job I did daycare for 2 kids, 1 family, which in MN is what you can watch without being licensed. I actually stay more organized, plan meals better (which makes grocery shopping easier and less food waste) and my kids had someone to play with. I made around 200 a week, maybe not quite, but it was more than I was making after expenses when I had a “professional” outside the home job. You get lots of tax breaks off this income, so there is no reason you should not be able to zero out at the end of the year. Lots of people like the smaller run daycare too, so their kids get more attention. There are lots and lots of moms who need later hours or overnights too, moms who are single and want to keep their jobs are really dependant on this. You can charge more for these hours. Otherwise tutoring, being a personal shopper, house or yard work for people. Check out on craigslist. You could repurpose items and make flower trellis, or yard art and have a sale? Get creative, lots of things kids can help with too.

    • Florence says:

      I get paid twice a month too. What has worked for me for the last four years is to estimate the amount I’m going to receive & work on my 0 balance budget from there. When I get the first paycheck, I divide the money up into the envelopes. If it is not enough to fill all the amounts, I portion them. For example, if I budgeted $80 into the misc category but only have $40, I put that with the first paycheck and the full amount when the 2nd paycheck comes in. Normally, the 2nd paycheck goes to rent anyways so that works out.

  • Wendy says:

    Wendy, I would check out Dave Ramsey’s site. It has some great tips. Check out his books at the library possibly too. It tells people who have non predictible incomes how to handle it even. A lot is suffering through some boring meals and giving up everything to get started to give yourself a little leeway, doing the snowball method to pay off debt and generally living like no one else, so after all is said and done you can “live like no one else” debt free sooner than later 🙂

    • Wendy says:

      Thanks for the tip. I’ve checked out DR and I’m blessed not to have any debt other than my mortgage. I’ve already cut out everything I can live without and some stuff and shouldn’t but do. The only option is bringing in more income and I can’t find a way to do that right now with circumstances as they are. Maybe I’ll just have to muddle along with a paper budget until circumstances change. I appreciate your response!

      • Kira says:

        Wendy, I’ve kind of been in the same boat off and on the past year. I do my budget per paycheck to account for those types of substantial variances. Honestly though, I didn’t see a big impact until I stopped creating envelopes for non-essentials (e.g., recreation, blow, etc.) — somehow having the money divided into separate envelopes encouraged me to spend more. Now I like to use an envelope for the grocery store because it’s so easy to spend double or triple what I intended, but with the remainder I do better if I withdraw it in large bills. Somehow knowing the total of those large bills encourages me to skip purchases I would normally make (e.g., fast food, Starbucks, etc.) so I can have extra to put in savings.

        The most important thing is to be creative — keep experimenting with different methods until you find what works for you. Some people like using Mint, but I like using Payoff because it sends me a weekly summary report showing me how much I’ve saved/paid off.

  • Jani says:

    So there’s one HUGE downside to using a cash system, which I’ve never heard anyone mention! Losing the cash–or worse, having it stolen! At least with a credit/debit card you can cancel the card or, in the case of theft, you are not responsible for the charges. With cash, when it’s gone, it’s gone. I love the idea of only using cash, but in reality, things happen. For example, my kids and I were off for a weekend away and went to the grocery store on our way out of town. Somehow in all the madness of taking 4 children to the store, my cash disappeared. We never found it. With no money we had to return home. Talk about disappointed kids! Any tips on how to keep the cash safe for busy moms with a lot on their minds?!! Thanks!

  • Natasha says:

    Using the cash system is a GREAT idea. I had wanted to do it for so long but had no idea how to make a budget as a single mom. My husband and I marred nearly 2 years ago and we FINALLY started using the cash system about 3 months ago. We made a budget on Exsel(or my husband I should give credit to) with each months expenses and how much each expense was per month( rent, electric, loans, etc) and wwe also have crappy rubbermaid containers we deposit some cash in each payday- we both get paid on the same Fridays each pay period bi weekly. I get paid direct deposit so I just go the the ATM and with draw how ever much we need to pay bills with in that two weeks.
    It also helps to have a DIFFERENT bank account for savings/emergencies as well- we also get an AWESOME interest rate! We generally use it for back up(my husband puts about $50-100 each paycheck into it). Like right now it has.50 in it because of an unexpected expense last week.
    The cash system does not work for everyone but it does for me.

  • Johnlyn says:

    Awesome article Crystal! We went to a cash system after reading more about it here and at Dave Ramsey. It made a huge difference! I’m glad that we did it for a time.

    Now we do a kinda/sorta Dave Ramsey plan which works better for us. We use a software program to keep track of “virtual envelopes” because it’s easier for me to keep track of the money I spend.

    So glad that we went to cash in order to get our finances in order though!

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