How I Control Cash Spending

Edit:  For those of you interested in purchasing the envelope system mentioned below, I have created a link to it at the top left-hand side of this page.  It is listed as Executive Envelope System.
If you are going to live without credit cards, you have to learn how to stay on a budget, balance your checkbook, wisely use your debt card, and control cash spending. For the sake of this post, “cash” will refer to actual currency: paper bills and coins!

Several personal finance writers suggest using an “envelope” system for cash management. Here’s how the “envelope” system works:

Withdraw a specific amount of cash from your checking or savings account. Separate the cash according to specific budget categories. Place the cash into individually labeled envelopes and use the cash in those envelopes to purchase items throughout the month. Common envelopes are: Gas, Groceries, Food, Eating Out, Miscellaneous.

If you are brand new to budgeting, I strongly recommend using the envelope system. It works very, very well, and it teaches discipline. Once the money in one envelope runs out, you have a choice to make. You can allocate more money from another envelope OR you can stop spending money for those particular items.

Beyond using the envelope system, here are some techniques that I use to control my cash spending.

  1. I limit those “convenience store” purchases that eat up so much cash. $1.39 for a 20 ounce bottled water? I purchase a 24 pack at the grocery store, and then keep them with me in the car. The same thing works for snacks. I purchase walnuts, almonds, and other nuts “in bulk” and keep a small jar of them with me in my car. So, when I want a snack, I don’t have to pay “convenience store” prices.
  2. I keep “change jars” in the kitchen, the laundry room, on my dresser. Whenever I empty my pockets, I have a place to put my loose change. Once a month, I gather the change and take it to the bank or use it for my daughter’s allowance. She loves counting coins!
  3. I talk to my kids before we go into a restaurant. My kids like to buy those little “prizes” at the front door of most restaurant chains. You know what I’m talking about: fake tattoos, those little bouncy-balls, bubble gum. These things cost twenty-five cents to a dollar a piece! If my kids have earned some money during the week, I will allow them to purchase one of these “fun things”. But, I always reserve the right to say, and I let them know this. I HATE when parents allow their children to beg for these silly things at the checkout.
  4. I talk to my wife at night about any cash she might need in the morning. You know how it works. Your wife is going to work, you are going to work, and the kids are going to school or daycare. At the last minute, your wife looks into her purse or you look into your wallet, and the question comes, “Do you have a few dollars?”. My wife and I used to swap the same cash, back and forth, during the month. Have you ever found yourself going through your spouse’s wallet/purse and “borrowing” some money? Of have you ever gotten somewhere and realized that your spouse “borrowed” some money from you? To avoid these headaches, discuss cash needs at night, and get prepared for the next day. A one minute conversation can save a morning of frustration.
  5. I think about my purchases. This might sound super-simple, but I find that most people don’t view cash as “real money”. We have become so accustomed to swiping a card or writing a check, that when we get cash we treat it as “bonus money”. Small expenditures add up. I had to learn to be responsible when using $5 and $10 bills. I think about my purchases, and I weigh the immediate benefit versus the long-term consequences. Once I am convinced that the purchase is a quality purchase, I make the purchase and I feel GOOD about the purchase.

9 thoughts on “How I Control Cash Spending

  1. Thanks for the post NCN. I don’t have a family or spouse like you do, but these kinds of posts do end up helping motivate me or think about what I’m doing with my money. (Lately, I’ve been trying the little notebook to record all cash outlays.)

  2. I have the opposite approach of most people, the cash system does not work for me. If I have cash on hand, that money has already been spent in my head because it is not in the checking account anymore. Therefore, I tend to spend it rather carelessly because it is not hitting my register when I spend it. On the flip side, when I use my debit card, I feel the pain because I see my checking account balance going down.

  3. Like perhaps most Americans at this point in time, I am overworked, underpaid, constantly in the car, and have to do much of my banking from my cellular modem and laptop from somewhere. Controlling what I am doing, or even fully grasping what I am doing, seems impossible.

    One of my goals is to simply do my banking accurately and pay my bills on time in order to avoid extra charges. One would think this would be a given, but I am literally so pressured that it is difficult to be accurate.

    I am going to have to get yet another job in order to pay down my debt. Sleep deprivation will become my friend, but in the end, it will be worth it.

    It’s not like I drive a fancy car, live in an expensive house, go on cruises or own diamonds on rubies. My debt has accumulated largely because it costs too much to live in the country right now. I am casting a wayward eye toward living in Puerto Rico or Costa Rica, and riding a donkey into town as a lifestyle alternative.

    I am very grateful that this website exists. It will make possible what I have tried to do for years, but only lacked a rudder.


  4. I’ve been late with my credit card payments, hit by bank fees and completely disorganized with the plastic. I read your post for a guide on how to get started on the envelope system and it’s really motivating me to get back on track. I started today using envelopes (payday) and am hoping this will set me straight again. Thanks!

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