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Q&A: How do you budget for online deals?

I am trying to go to cash-only and just use the bank account for bills! But how do you budget for online deals? I love the idea of going cash-only, but hate missing out on all the deals! Is there a good way to do this or am I just not going to get the deals now? :(-Holly

Our family uses a “hybrid system” for our expenditures. We use cash envelopes for items we would typically buy locally (you can see a list of all our cash envelope categories here) and then we use debit cards or online bill pay for our utility bills, insurance and other bills which are paid on a monthly basis. This works well for us and, from the experimenting we’ve done, we’ve determined we spend quite a bit less by paying for the bulk of our expenses with cash than if we were swiping our debit cards.

However, the question people often ask is, “If you use cash only for clothing, food and so forth, does this mean you can’t purchase any items from your cash envelope categories online?” Well, actually, no.

We are on a strict written budget and cash envelope system and we only buy things which we have the money allotted ahead of time to pay for. We use gift cards accumulated through Swagbucks to pay for some of our online purchases or we buy online with our debit card and then refund the money from our cash envelope to our bank account.

It might seem like a hassle to refund the money to our bank account, but we’ve found that this actually encourages us to be a lot more thoughtful about purchases. Instead of just jumping on a good deal because we’re afraid it might not be available for long, it forces us to think through whether it’s something which is a good deal for us — meaning it’s something we need or have been planning to purchase, something we can afford in that budget category and something we will use. In many cases, because it is a bit of a hassle, we end up talking ourselves out of the purchase before making it!

If you don’t feel comfortable using a debit card online or don’t want to mess with refunding money from a cash envelope to your bank account, I’d suggest purchasing pre-paid cards from the money in each cash envelope category. Keep these cards in their designated envelopes and only use them for online purchases from that category. This allows you to protect yourself from potential debit card fraud while still sticking with your budget and using money you’ve specifically set aside for that budget category.

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  • Sarah says:

    Great Post Crystal! Definitely an area that is more difficult to manage. Thanks for the advice!

  • I do a cash system using a debit card…if that makes sense. I find if I use actual cash, it is easier to spend the money

    • Anna says:

      I too use a debit card or credit card for all of my purchases. For my husband and I, when we are carrying cash, it burns a hole in our pockets. We also sometimes just lose a $20 bill out of our pocket getting into the car or sitting down somewhere. I do not write down every purchase that I or my husband spends, so the online banking helps me keep track of my spending much better than I ever could. Using a credit card definitely helps me spend LESS money because I have a little of a debt- phobia. We pay our credit card off each month and actually get about $300 back in cash checks each year from our credit card company. I am very diligent though in always getting our bill paid on time, ect.. and have never paid the credit card company a dime.

      • Sarah says:

        We earn cash from our credit card too! And always pay it off each month so we have no extra fees. Works for us…not for everyone though.

      • Catherine says:

        Same here! I’m a huge Dave Ramsay follower, but the cash envelopes never worked for us. My husband’s blow money would be gone in a flash with no idea what he spent it on.
        With debit it’s very easy to see where it was spent.
        Yes, sometimes you end up going a couple dollars over because if you’re on the go you have to add it all in your head and estimate how much is left in the category. But it still works better for us overall.

        • Aberline says:

          Yeah, if I have cash in my wallet I am much more likely to spend it, because I’m thinking, it’s already out of the bank, free money! I am much more likely to leave money in the bank if it is already there.

      • A.S. says:

        Same here. We use CCs only, our rewards are hotel points (personal preference). We pay off in full every month and have never paid a penny in finance charges. In a given month, we withdraw about $20-40 in cash. For the past 4 years, our 3 week-long vacations have been fully paid for (flight/hotel) because of this, and we love it. We fund a small vacation fund (food/car rental/etc.) on the side. But for everything, it doesn’t work for everyone.

      • Dee says:

        We use credit cards for everything, too, and pay the balance in full each month. Our day-to-day card and my business account (all of my employees are on my account) all contribute to a “points” account that we use mostly for travel. We’ve also gotten a Wii and some appliances with points. The first year, I got gift cards that I used to shop for Christmas. It is all free since we don’t pay the cc company anything.

        One of our son’s university allowed us to put his tuition on our credit card with no extra fee. We had the money in his 529 to pay it. We got the points and paid the bill in full that month, too. His tuition alone got us enough points to take all of our kids to Montreal (where our youngest daughter goes to college) for Thanksgiving. She doesn’t get the time off, so we go to her. She will spend her junior year in Japan. The kids are lobbying for Thanksgiving in Japan. They better start getting some of their own points to make that one happen. 😉

        • Emily says:

          Dee, how awesome that you were able to take your whole family to see your daughter for Thanksgiving. I hope you all get to go see her in Japan!!

          My kids daycare doesn’t allow us to use CCs to pay tuition. I so wish they did…..we’d get back to Disney a lot quicker if they did. However, my husband is going to school part-time and his tuition is reimbursed by his company. I’m going to have to look into using our CC to pay the tuition…..I think his company just puts the reimbursement $ back into our bank account, if I remember correctly. Hmmmm….something to go research.

          • A.S. says:

            Definitely look into this. My husband goes to graduate school part-time and his reimbursement is also via his company. The school allows him to defer the payment until the end of the semester – we pay the tuition with our CC and the reimbursement comes directly into our checking account. We use a mileage earning credit card for this and have accrued 6 free R/T tickets in the last 3 years!

          • Dee says:

            Watch out for fees charged by universities if you pay by cc. We have 5 kids – 2 graduated already, 3 in school now (last semester for 2 of them — huzzah!). Only one of their universities didn’t charge a fee to use a credit card. At least it was the expensive private school! (Thankfully we got through with only one private school. The rest went to public schools. Yay.) I could go on and on about public schools in Canada being the best value in North America, but that is waayyyy off topic.

            This is kind of off topic, too… but hubby and I are working the system by opening credit card and checking accounts to get as many airline miles as we can for the introductory offers. You have to be precise in spending a certain $ amount/ time frame. I track it all in Quicken. And you have to remember to close the checking acct’s before they start to charge fees… and the cc’s after enough time to not screw up your credit rating + avoid fees. So far, we have enough miles for our daughter to fly there and back (and come home for Christmas) + hubby and I to go visit next spring. I’d love to acquire enough for hubby and I to fly business class since it is a 14-hr flight. We’ll save our regular points for hotels when we go visit.

            Good luck with getting points/miles for your hubby’s tuition.

      • Cristina says:

        I also use my credit card for everything. Actual money seems to disappear without a trace, so I find it more convenient to keep track of my money online without spending time and gas money going to and from the bank all the time.

        If I absolutely had to use cash for things like clothing and groceries, I’d probably transfer the cash to a credit card envelope like a few people already mentioned and put it back in the bank periodically so that I could pay the credit card in full at the end of the month.

        I understand that Ramsey’s main audience is people who have or have had serious debt problems at some point or another, but it seems to me that he treats them like reformed alcoholics by not trusting them to make good financial decisions outside the confines of physical cash. Sure, credit cards got them to where they are now, but credit cards are not evil if used responsibly.

        • Crystal says:

          We actually just love using cash — and we find we spend a lot less with cash than we do when we swipe (though not everyone is this way). For us, it’s so much simpler than having to mess with paying a bill or worrying that we have enough money in the account. And while I’ve never had a credit card, I don’t have a desire to have one because I love the simplicity and ease of cash. 🙂

          • Meegan says:

            I totally agree with Crystal, although my family has used credit cards previous to taking FPU. I understand that there are quite a few people who “work the system” with reward points and paying off balances, but I find parting with Andrew Jackson is a lot harder for me than swiping a card.

            To deal with internet purchases, I do one of two things:
            1. Drive to the bank and deposit money either before or immediately after making the purchase
            2. Roll my Swagbucks rewards and mystery shopping money into Paypal. Paypal then becoems my “fun money” to spend on things that pop up on the internet.

          • MomofTwoPreciousGirls says:

            I agree with you Crystal, I hoard my cash and HATE spending it…but a swipe of a debit card does not pain me one bit!!

      • Anna says:

        I am glad to find that there are many others who use credit cards like me. Sometimes I feel guilty just because some money-saving blogs seem so anti-credit card. The only thing that bothers me about that I do use credit cards and pay them off each month is the credit card interchange fees that are charged to the businesses that I use my card at.

  • Anke says:

    Love the prepaid CC idea…hadn’t thought of that!!! 🙂

      • Jen says:

        While this may be a good idea for some, please be aware that to purchase a prepaid VISA or MasterCard, there is a service fee of typically $4.95-$9.95. This may not make a dent to some but to others, like us, this is about 20% of our weekly grocery budget.
        We (ha ha, I, as I don’t like my husband to grocery shop – he spends too much) prefer to use cash.

        • krista says:

          I got a prepaid cc for internet purchases only and I didnt mind paying the initial 4.95 but what I didnt know is that each time you deposit on it, you have to pay that too, so that didnt work for me, ugh

  • Johnlyn says:

    I use my debit card and then pay myself back.

    This definitely makes me think about a purchase. I want to buy a book right now, but don’t want to go to the bank to deposit the money. For some people this would be aggravating, but for me it’s a “cooling” off period so I don’t blow my money on mindless items.

    I definitely spend less money now that we use the cash system for most f our purchases. My friend cannot handle having any cash around, but categorizes every purchase from their checkbook.

  • Kathryn says:

    We leave a small amount ($5 or less) in the bank for categories like clothes or gifts and repay our debit account with the cash from the envelopes if it’s more than that. You’re exactly right – you think even more about it if you know you’ll have to go through the trouble of making an extra deposit if you buy something online.

    If you use prepaid cards, be very aware of the fees charged – many will charge if you haven’t used it within a certain time period, etc.

  • robyn says:

    speaking of pre-paid CC, does anyone have experiences with one they liked? hubby and i each have our “free” money each month and i’d personally like to put mine on a CC/visa (preferably a re-loadable one) and add to it as i garage sell or craiglist things…where do i get one? the only ones i’ve seen have $4.95 fees to initiate???

    • Rae says:

      sometimes CVS will do deals where you’ll get ecb’s back when you buy them. So it makes it like getting the fees waived. If you don’t need it right away, you could wait for one of those sales.

    • Patty Cerney says:

      Our school does a MANNA gift card program and our church does a SHOP program (I am sure it must have other names in other places) where each month you can buy gift cards and VISA and/or Mastercard is included with no fees. The organization buys them at a discount and keeps the “profit” as it is used for fundraising. Be aware though that the Visa/Mastercard ones do expire and you have to use them to the penny or you lose that money. Does that makes sense? If your bill is $5.00 and you only have $4.50 left on the card, it will deny the purchase. Kind of annoying.

      • Jennifer says:

        There is a way around having the card declined. If you know the card has $4.50, have the cashier run the card for $4.50, and pay the the other 50 cents in cash. The visa/MC gift cards work the same way. You have to input the exact amount left on the card, and do a split transaction (paying 2 different ways) to use it all when your total is more than your balance.

        • Bethany says:

          Thats how you get around it in the store – but this post is about using them for online shopping. I don’t think that would help!

          • story says:

            Another way around it is to use the prepaid card to buy a store gift card in the exact amount right before you plan to make the purchase. That way the card gets depleted and tells you what the balance is. So you’d go to amazon, use your $4.50 prepaid card to buy an amazon card, then use the amazon credit to buy your items. In the case of a $5 purchase, you’d still need to have a second card to cover the difference, but it’s a way to make sure you get all the money off the first card.

      • Kim says:

        Also, some stores will actually just use up the balance, even if you don’t know what it is. I always use up my cards at Safeway or Starbucks because it just empties the card without denying it.

    • Lindy says:

      We have an account with a credit union and there the pre-paid Visas are only a $1.00.

  • Jessica says:

    My husband and I have used an envelope (cash) system for over 9 years but we do still have a credit card for online purchases and gas. We have an envelope that is labeled “credit card” so if we make a purchase with the card we take the cash from whichever category it should come from (Christmas gifts, etc) and put it in the credit card envelope. Then when my husband does the bills, he deposits that cash in the bank to pay the credit card. I know that wouldn’t work if you were trying to avoid credit cards, but it has worked for us. My husband likes that we get “miles” and is planning a ten year anniversary trip if he can get me away from the kids 🙂

    • Kelly says:

      This is how we do things as well. It has worked out great and keeps us accountable.

    • Liz says:

      Jessica, thank you so much for that idea… We do the same thing where we use cash for everything but gas and online purchases. We use a credit card for these 2 things, and pay it in full every month, no exceptions. Then we cash in our miles for 50-dollar Walmart gift cards. Anyway, our online purchases have been getting out of hand, because we don’t really have a limit for this. You gave me a great idea: to take the cash out of the appropriate envelope. Not sure why we never though of this, but this idea should really help our credit card balance decrease, making our savings amount increase. Thank you!

    • Johnlyn says:

      I love this idea! I hate the idea of getting a credit card bill every month, but if I had the money in an envelope then it wouldn’t matter to me.

    • Jessica says:

      We do the same thing. So much easier to take the envelope to the bank to pay the bill!

    • Bethany says:

      BEST idea presented so far 🙂

  • Holly says:

    I use my paypal debit card for online purchases. Anything in that account is from doing surveys and focus groups, so it is not coming out of our bank account. Plus, if something goes wrong with the purchase, I still have the buyer protection through paypal, and I really like that.

    • Emily says:

      I’ve thought about getting a paypal account for surveys. Does it have to be linked to your bank account though? Or can you set one up without inputting any bank account information?

      • Holly says:

        Mine is linked due to it being a business paypal type account from my old business years ago. However, you do not have to link it to your bank or credit card, from my understanding.

  • Suzanne says:

    When I find a better deal online than I can get locally with cash, my cash envelope pays my envelope called “had to use card, deposit to acct.” then I put that money back into the bank periodically to pay the debit or credit card. Yes, it seems complicated, but it keeps me honest with myself and keeps it straight in my budget.

  • Jolene says:

    Just an FYI but I have trouble using prepaid cards online. The credit ones with the visa logo, when they run them, they don’t always have the same zip code as where you are from. I had trouble with both kids socks and deal pulp with this. I don’t know if there is a way to check this before purchase of card. Vanilla Visa will tell you just to register them on their site but that doesn’t always work. For instance, we are from Pa and have purchased cards that have a CA zip and then flunk verification.

    • Ashlee says:

      I’ve had the same issue with using these online.

    • story says:

      I had some prepaid cards that I earned through surveys, and I had the same problem. I went to the website listed on the back of the card and was able to change the billing address on the card. I couldn’t change the name, though, so for one of them I had to list my name as “Thank you” when making the purchase.

  • We also pay for online deals only when we have the money in that category. We pay with a credit card that gives us cash back and then place the cash from the envelope in the bank so we pay off the the credit card every month.

    This has worked well for us. Even if it’s a great deal if we don’t have the money set aside we don’t purchase it!

  • We do something pretty similar to what Crystal mentioned, though we have a “Debit” envelope that I keep in our house in a special place (along with the “babysitting” cash envelope, etc). When we spend online, we pull the money from the appropriate cash envelope and transfer it to the Debit envelope. Then, when it’s time for me to withdraw cash for the next month, I simply deduct the amount in the debit envelope to lessen my withdrawal since we already have that cash on hand. I hope that makes sense…?

    • Sherri says:

      We do the same thing, but our envelope is called “Put into Checking.” Rather than making multiple trips to the bank to deposit small amounts, I just put $ into that envelope, and then pull out of it first when I distribute hubby’s paycheck. Any more that’s needed can be withdrawn from our checking account.

  • Jen says:

    As far as “free” prepaid Visa’s, we really like TD Bank because they sell prepaid Visa cards to account holders with no fee. (This is an east coast bank). Other banks may offer the same service, maybe even your bank. We belonged to TD and had no idea about this till a friend told us 😉

  • Shannon says:

    Love, love, love the idea of buying the prepaid cards for online purchases! I dislike giving my debit card info over the internet, even though the site claims “secure”. I have to say I already do this with Starbucks. I purchased a gift card from them a while back and reload it when I’ve used it up; this allows me to stay within my monthly budget for this extra.

  • Erin says:

    For Amazon purchases, I use my swagbucks. The awesome organic lollipop deal? Missed it several times because I didn’t want to spend those hard-earned gift cards, however, I was able to get in on several awesome diaper deals and buy my husband the Planet Earth BluRay DVD collection he wanted! With other purchases, can’t you just deduct the amount spent from your cash envelope? So, for example, if you purchased clothing, remove the amount spent from the clothing envelope (or maybe just note the amount on the envelope so you know not to spend it). Rather than bothering to go to the bank to refund yourself, just hang onto it until it’s time to replenish the cash in the envelope.

  • I always use CC s which has cash back options or points, pay off monthly, and no plans for giving up. I loved the driver’s Edge card (too bad they changed it), and one time earned $500 worth of gift cards after I submit my miles driven.
    Last week I redeemed 20,000 points for $200 Wal-Mart gift cards. So, if you pay cash, in my opinion, you can make it better by using a CC with rewards, and pay it off at the end of the month.

  • carla Sorensen says:

    This was an excellent answer to a great question! 🙂

  • Heather says:

    We also have one free credit card that earns use Disney money and one free credit card that earns us airline miles. We treat these credit cards like ATM cards – after a purchase is made on them- we transfer the money to a savings account right away. When the credit card bills are due – all the money is in that account to pay the entire bill. We would never use the credit card unless we had the cash to transfer at the time of purchase (a little like what Crystal does with moving money from the envelope and depositing it into the bank account) The airline miles have gotten us many free tickets for travel and the Disney rewards help to pay for meals and park tickets………..all for free since the cards are free and we have set aside the cash to pay the balance each and every month.

    • Emily says:

      Now that’s a good idea. Transfer the money spent via CC right away to the savings account and then transfer it all back to checking so you can write the check when the bill is due. I like it. I too have the Disney credit card and when we went last fall we had enough points to not worry about getting our kids souveniers every day, paying for our son to eat (who was too young for the dining plan but can out-eat his older sister) and brining home souveniers for family.

  • I only use credit cards for online deals. We have an ING account where we have various savings accounts for different items (quarterly bills, car maintenance,stockpile, extras etc). Each month we budget a certain amount that goes it to those savings funds. When we have extra money we split it between emergency savings, debt repayment, and extras. We use our extras to save for some fun items and some serious items like a new dishwasher. I use a cc for online purchases but I immediately make a payment from our extras fund. Because I know the money I have to spend is limited and I usually want a working dishwasher more than an online deal, it helps me think twice before spending the money.

    Also, I use a cc for gas expenses as well. I actually pre-pay my cc for this purpose so I can get rewards as well.

  • I like the idea of getting a prepaid CC for online purchases. All the fraud around these days is so scary. The only thing is that we are at risk even when we use our cards at the grocery store! This does not mean we shouldn’t use them or live in fear all the time. That will be stressful for me.
    Perhaps one of those monitoring services may be a good idea, if you feel too exposed to risk. After watching several episodes of CNBC’s American Greed, I feel like we are at risk just by getting a statement in the mail! There are so many scams out there. We always have to be careful.

    I agree with everyone about using the bank card to track expenses. Cash just happens to dissipate and this may be as a result of our own lack of discipline. Sometimes when I’ve spent very little on my groceries, I spend a little more on daily deals. There should be a budgeted amount for these one way or another. Occasionally, they have deals that are too good to pass up.

  • Krysten says:

    I know a lot of you are committed to using cash, but we use a credit card for everything and pretend it’s a debit card. =) We have two reasons for using a credit card instead of a debit card. 1.) Credit cards are more secure than debit cards, and 2.) We get rewards on our credit card.

    When using our credit card, we only spend money that we already have, and in my husband’s bookkeeping, he subtracts each purchase from our finances just as if we had used cash or a debit card, because in our eyes, when we buy it with the credit card, the money is already gone – it’s no longer ours, but belongs to the company. Then when the credit card bill comes, we take the funds that we’ve already set aside for this, and pay it!

    We make about $150/year with rewards from our credit card, which may not seem like much to all of you, but it’s 1 month’s worth of free groceries to us!

    • Krysten says:

      Ok, I missed the main question with all of my talk there! Blonde Mommy Moment!!! I only buy online deals if they’re something I would normally buy, like diapers or Christmas presents, and I have things like that in my budget, so when a deal comes up and it’s something we NEED, and I still have the money left to buy it, I do it. Some of those deals are absolute steals, but if we don’t need it or don’t have the money left in the budget, I remind myself that there will be other deals just as good in the future.
      And like I posted above, we use a credit card for everything, so that solves the cash issue!

  • Lisa says:

    I keep a spreadsheet of my savings account with all the different categories budgeted. When I make a purchase, I use my debit card (to earn points) and just transfer the money to my checking account to cover the expense and deduct the amount from my spreadsheet.

  • Kristi says:

    We never did well with cash. I always found myself counting out change and finding my money with two kids screaming and a long line because of all the coupons I used:) For us, we use our credit cards, but also a envelope budgeting system. If you have an android phone (I bet it is iPhone as well), it is the free app EEBA (easy envelope budgeting something) and it has done wonders for us. You put in your categories and your budget for them. Then, you put in your purchases and it tells you how much you have left. Then, my husband and I can put in each of our purchases (not worry about who has cash) and also keep track of our budget all the time. We pay off our credit cards each month, but also get the rewards (like the $120 cash back check from American Express for our years purchases):)

    It works for us, but everyone has their own way that is good. Love the app, though.

  • jen b says:

    We have 2 credit cards, one for gas and large purchases that we pay off each month for the cash back bonus (that we make about $150/year o), and another that I do not carry with me, but leave in my home office. If I need to make an online purchase, I use this card and then write it in my “finances journal” as a bill to be paid at the next payday (usually the funds come from the cash I would normally pull out for that type of purchase; I just pay the bill online and pull less cash). We also earn cash back on this card, but since the purchases are smaller and not used as often, we maybe only earn about $25/year back. I do NOT use our debit card online because we know more than one person who has had their card compromised from online purchases and lost money from their bank accounts.

  • KimH says:

    I usually use a credit card when I buy anything online since using a debit card doesnt have the same securities a credit card does.
    I only do online banking so I rarely have cash in hand, but I have money going to 4 different accounts and use each one for different objectives.
    1. Friday Out lunch money and/or cash during the week-this one is @ a credit union in the building where I work so its easy access.
    2. savings
    3. bills
    4. groceries & gas & whats left over for whatever I want or sometimes I’ll move it into the bills account. When the money is gone.. spending stops. I keep a very precise daily balance and know to the cent what is in each account.. usually. 😉

    I also use Pay Pal online.

  • Becky says:

    For online purchases, I’ll use my debit card, and then remove the equivalent cash amount from the corresponding envelope and then make a cash deposit as needed at the bank. I use this a lot for our ‘baby’ and ‘pets’ envelopes, where free shipping +online deals tend to be better than store shopping. If I spend $30 online, I’ll pull $30 from the envelope so that my balance reflects what I have left on my budget. That way, if I do store-based shopping later in the month, I don’t overspend. If you do a lot of ‘random’ online shopping, I would create a cash envelope for that specific category.

  • Leah says:

    I’m a mostly-Dave Ramsey girl, and use cash envelopes for all household expenditures. If something comes up online, I use my CREDIT CARD (because there’s no cash in the checking account to cover it – it’s all in my envelopes). As soon as I click “submit”, I take that amount of money out of the appropriate envelope and stash it in a “pay the credit card” envelope for when the bill comes due. I never fail to pay it off in full, and it preserves the cash system. Easy peasey.

  • MileMarx says:

    Paypal, for example, allows to connect your account to your checking account, not necessarily a credit card. Also, a debit card would work.

  • This is what I do. My goal is to pull the money immediatly, but when that doesn’t happen, I transfer the money when I separate the cash into my envelopes each week.

    I also do this if I’m at a store such as Target and have products from multiple categories. Since I usually with my kids, it’s easier to use my debit card in the store and transfer the money when I’m home.

  • Vanessa says:

    Great Question, and an excellent Answer. We have an envelope for our online purchases, for example, we allocate money for
    iTunes/Apps/Amazon/Online purchases each month. We track the spending on the envelope (incl. tax), but we leave the money in our account. Since we pay cash for everything other than our bills, we don’t ever feel like that money is “in the account.”

    I like the idea of prepaid cards though! I hadn’t thought about that!

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