If you want to gain control of your spending, then use cash for your day-to-day purchases. Learn how to budget your expenses with cash. Think of this as cash spending 101.
The transition from swiping addict to cash is king advocate isn’t as hard as you think. You don’t need to a million envelopes to categorize your cash expenses. We’ll dive into the EASIEST budget hack ever: weekly cash.
This is part four of the series:
Create Your 2022 Budget with Me.
You can create your entire annual 2022 budget in advance! Catchup on the series here:
- Five Reasons Why you NEED to Budget One-Year in Advance
- How to Create a Back of the Napkin Annual Budget in Minutes
- Budgeting 101: Understand Your Income
- Six Categories for Fixed Expenses
Stay tuned to learn next how to budget your larger or irregular flex or variable expenses online.
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Why use cash to budget expenses (3 reasons!)
Before diving into how to use cash, here are three reasons why you need to budget with cash.
1. Stop online impulsive spending
The number one reason to use cash is to stop emotional impulse spending to have more for areas you want, like vacations, debt pay off, home DIY projects, new car, home down payment, etc. Using cash puts a cold hard stop to late night scrolling and Amazon purchases making you poor and Jeff Bezos richer.
It’s a fact: you spend more with credit cards. Dun & Bradstreet, found people spend 12-18% more when using credit cards instead of cash. McDonald’s reported when they accepted credit cards vs. cash, the average transaction rose from $4.50 to $7.00, a 47% increase!
With cash you have a set amount and you part with the money; when it is gone it is gone.
2. Help small businesses
Every transaction with a credit card the business owner pays a fee of 2-3% of your purchase. This hurts small businesses, in fact you’ll often see coffee shops that say, “we prefer cash payments.”
3. More secure
You may think credit cards offer the most security, but they don’t. For example, with the Target breach an estimated 70-110 million customers credit card information was stolen. If a transaction is made on your credit card, you can cancel the card and be reimbursed, but your identity can be stolen. Your name and information can be used to open new credit cards or lines of credit without you having any idea! This can take you years to sort out.
The EASIEST Way to Budget Expenses with Cash
The easiest way to use cash is to take out one set amount of cash for the week and simply put it your wallet! I call this weekly cash.
Weekly cash is a brilliant system for managing money for day-to-day expenses in areas people tend to overspend: like take-out, happy hours, or late night online shopping. Weekly cash includes spending on groceries, gas for your car, small gifts, clothes, and entertainment.
When I was getting out of debt all the personal finance gurus said the best way to get control of your money is to use cash for day-to-day purchases. I thought, “hmmm, if they’re ALL saying this, I ought to try it!”
Most experts say put a set amount of cash in envelopes for difference categories. For example, you’d have an envelope for groceries, eating out, clothing, gas, toiletries, entertainment, beauty, fun, etc., Or instead of envelopes, some experts recommend using jars for each category.
Having an envelope for every single variable expense is overkill and unnecessarily complicates things. All you need to do is take out cash once a week, put it in your wallet, and make it last for the entire week! Easy peasy.
What NOT to spend in cash
Keep in mind weekly cash is for your flex or variable expenses. Earlier in the series we discussed fixed expenses. You won’t be walking into your leasing office to pay rent with a wad of cash. I recommend paying those automatically through ACH or your debit card.
Next in the Create Your Budget with Me series, you’ll learn how to map out larger flex expenses like flights, medical costs, home repairs, etc. and spend with intention using a debit card.
How much cash!? The breakdown of my weekly cash habit
If you want to trying using cash to stop emotional impulsive spending, but don’t know how much cash to use, I personally take out $120 for day-to-day spending. It’s worked like a charm for over a decade. A good starting point is about $100-$160 per week/ per person.
Here’s the breakdown of what I spend with weekly cash:
- $20-50- groceries (for one person)
- $20-40- gas to commute to work, or weekend road trips
- $30-$80- happy hours, entertainment, clothes, small gifts, and other day-to-day spending
Make sure to go to your ATM machine from your bank! Avoid fees and take out a set amount to last for the entire week.
Related Post:
What difference does using cash make?
Kim, Best Money Class Ever student described weekly cash as her “magic pill.”
She said, “Weekly cash changed my life.” For her, she was able to pay more to debt. The result: she paid off $45,404 in 28 months.
Use cash for your day-to-day purchases like food, gas for your car, small gifts, clothes, and entertainment.
In a nutshell, weekly cash is too legit. Too legit to quit. Yes, I’m a child of the 90ies and MC Hammer’s right, somethings in life are too legit to quit. Weekly cash is one of those things.
