Why we LOVE cash budgeting (& you should too) – NSC Series

Why we LOVE cash budgeting (& you should too)

I’m sure you’ve heard the term cash budgeting before – probably many, many times. However, I want to tell you why YOU should love it and use it every single day – it’s not a secret. Utilizing cash budgeting is the best way to stick to your budget that you designed yesterday using our 3 simple tips – (Click HERE if you want to catch up)!

I’m horrible about spending money spontaneously. I mean that in all honesty: I am absolutely terrible at saving money. You see, I see something that I think we need and then I have this unbelievable desire to go out right now and buy it RIGHT NOW. It’s a terrible habit, but one that is rather difficult to break. The worst part about spending habits? They can ruin your life if you let them.

So, thankfully my wife is understanding about my spending. Unfortunately, it’s because she does the exact same thing. And for the first year that we were living together, we didn’t put together a budget at all. Sure, we were conscious about the things that we needed in our lives (bills, food, etc.), but we didn’t create a budget that would actually help us to reach our goals. And you know what? It sucks! We wasted so much money on fast food and clothes and who knows what else when we could have put it all toward paying off debt.

Well, we learned quickly that a budget was a necessary item in our lives. We put one together and attempted to follow it. The problem is all those silly, little $1 purchases that seem like no big deal. $3 here, $5 here – they all add up though! We broke the budget almost every week because we weren’t tracking closely enough (and it’s just too easy to swipe that damn debit card)!

Now, I know that we had money in the bank to support these habits, but the problem is that the money we used for these could have gone to debt.

That’s when we decided to implement Dave Ramsey’s plan of cash budgeting and you know what? Cash budgeting changed our lives.

Cash Budgeting - www.diyjahn.com

If you are new to our NSC Series, start here!
-If not, you can skip this section-

As some of you may know, we are in the midst of our first ever No Spend Challenge (NSC) which started January 1.

The short story is that my wife and I racked up a ton of debt (read how HERE) and want to pay it off as quickly as possible so that we can live our dream lives (read about our goals HERE). This challenge will help us learn about living frugal, saving money, and paying off our debt faster.

Visit our post, Frugal Living at its Finest: the No Spend Challenge, to view why we are doing the challenge, what the challenge entails, and the rules.

The hardest thing about budgeting and frugal living is doing it alone and that’s why we want to invite you all to join us on our NSC. Sign up below to opt-in to our email community, filled with exclusive tips and tricks for saving money to survive living frugal during your NSC month.

Follow our rules or make your own! Join for one week or the entire month! We know that not everyone is in the same situation we are in. Stick with the No Spend Challenge for as much or as little as you are able in your situation and don’t be afraid to hop on after the starting date (it’s never too late to join in on the fun!).

We’ll be taking the challenge right alongside you – with daily blog posts, encouragements, and exclusive email information and communication: this will be the single, greatest choice you make to jump start the New Year.

Why we LOVE cash budgeting (& you should too)

The idea behind cash budgeting is simple. You put together your budget (use the tips I’ve outlined here to build a better budget for you and your family), you withdraw the necessary amounts of money to cover your budget, you spend the rest of the money paying off debt / putting it into savings. You then spend that money according to your budget allocations.

So, let’s look at our example of Bobby.

Bobby has just finished developing a budget that will work perfectly for his family, but now comes the tricky part: it’s time to implement the budget. How will he do it? Well, with the cash budgeting system of course!

Bobby knows that he gets a deal by paying his bills with auto-withdrawal, so he leaves enough money in his bank account to cover those bills. For all other bills, he withdraws the cash and places it into envelopes. For example, he has an envelope that is purely focused on his food budget of $300 and a separate one for his fun money budget of $40.

As Bobby goes through his month, he spends his money accordingly – just as he normally would. The only difference? He’s using cash instead of a debit card. How does this change things? Well, here’s what happens when Bobby attempts to “break the budget.”

It’s the end of the month and Bobby heads to the store. He grabs the needed food items, but he also adds a case of soda and a box of candy. He heads up to the cashier to pay for his order and takes out the $52 he has left in his envelope. The total comes to $56. What does he do? Well, Bobby can’t pay for what he has. So, instead of just accepting this fact and purchasing it anyway (like he would with a debit card), Bobby has to choose to put either the soda or the candy back. By utilizing the cash envelope system, Bobby stuck with his budget instead of overspending.

Now, to some of you, $4 may not seem like a lot, but consider the fact that a debit card feels “less real” than having cash in hand. When you go to the gas station, you notice that you have to break a $20 instead of just swiping the card for that soda and it begins to feel less worth it. The small amounts add up to big dividends and are definitely worth it in the long run!

My wife and I are living proof of the magic of cash budgeting. As I told you, we started by simply planning a budget and following it with our debit card – but our finances were everywhere. We couldn’t straighten them out with a ten foot stick and a rolling pin (whatever that means).

Cash Budgeting - www.diyjahn.com (1)

We started using the cash budgeting system and our lives changed! Each month we with draw $200 – $100 for food, $50 for gas, and $50 for fun money.

We follow these rules:

  • Money cannot be transferred between envelopes. If there is a need to, then the budget needs to be changed during the next month instead.
  • All extra goes toward debt. At the end of the month, any extra money goes straight toward debt – there are no rollovers.
  • All coins go into our coin jar. Instead of spending our quarters and dimes, we collect them in our coin jar. When we want to take a vacation, our coin jar gives us that opportunity.
  • Debit cards may never be used. Honestly, I don’t even know where mine is most of the time. It’s always lying around somewhere in the house, but we never use them anymore unless absolutely necessary (we’re talking emergency situations here).

Is cash budgeting worth the hassle? Well, why don’t you tell me: is it worth it to take 5 minutes to withdraw money from the bank in order to save hundreds of dollars? I can guess your answer.

Cash Budgeting

Cash budgeting has changed the way I look at money – it’s not the same ever-replenishing resource it once was. Since starting our cash budgeting system, we have paid off over $12,000 in debt! How insane is that? And there is more to come! We are fighting our way to aggressively paying off almost $200,000 in debt and becoming debt free!

Today is day 20 of the No Spend Challenge and we have finally reached a new level: we are 2/3rds of the way done! Woohoo!

Our quote for the day is by Johnny Cash (because why not, lol!).

Quote - Day 20

“Life is rough so you gotta be tough.” – Johnny Cash

Now, I know that I chose this quote because his last name is Cash and we are talking about “cash” budgeting, but I really think that it’s fitting for today. We are almost done with the challenge and the first month of 2016 is almost over, but I’m guessing that it hasn’t been easy for everyone.

The good thing is that being tough doesn’t have to mean going it alone – you can be tough by being in community and surviving the challenge. Want to join our community? Head over to Facebook.com/groups/fiscalfast and join us today!

What is your #1 financial struggle?

Leave your responses in the comments below!

Disclaimer: Some of DIY Jahn posts contain affiliate links. While I do earn money through Fronto, Ibotta, and other companies, and bonuses for referring people, all of my opinions on the company are 100% honest and my own. Also, please note that recipes, fitness tips, and financial tips are not given by a professional. To understand what this all means for you, click here.

38 Replies to “Why we LOVE cash budgeting (& you should too) – NSC Series”

    1. Saving for a baby is certainly an important and exciting goal! First of all, congrats!! Second, you should be really proud of yourselves for thinking ahead. I hope you get back in the swing of cash budgeting!! Thank you for your comment, Amanda

  1. My number one struggle for sure is not looking at the account. I know, BAD. But we used to struggle big time with covering our bills so I have this fear of seeing those negative numbers, even though we aren’t in that hole anymore!

    1. I totally understand. It can be really hard to see those negative numbers – it’s hard to handle. I have dealt with that too, but once you are out of the hole, it’s sooo important to check accounts. Cash will help you with that too! Try it out! Thank you for your thoughtful and honest comment, Vanessa 🙂

  2. This is such an interesting idea, I have friends at church who do it too. So far, credit cards (that we pay off) and spreadsheets work for us, but something to consider.

    1. That’s so great that you are able to make credit cards and spreadsheets work for you! It’s what works for you that matters – for us, cash budgeting is key, but for some, credit cards work 🙂 Thanks for sharing, Lindsey!

  3. I’ve started implementing the cash budget and it is HARD but I’m definitely seeing the advantage. I hate my debit card. I’m now trying to teach my teenagers to do the same (they are 19 and 18) and are just starting out with their own accounts. Hopefully, we can all get on track and I can teach them early on how to think positively about money. Great post! Thanks for sharing.
    Amber Lea Easton

    1. That’s so great that you are teaching your teenagers to think wisely about their money! I love it! You’re right though, it’s a HARD thing to use, but it’s so good once you get the hang of it. I’m so glad that you are using these and sharing them with the next generation! 🙂 Thank you for reading, commenting, and supporting, Amber!

    1. It certainly would! No matter what the income or expenses, keeping a budget will save you money that you can use toward paying off debt. 🙂 It’s worth it to get rid of the debt! Thank you for your comment!

  4. This is very interesting, I have never heard of a cash budget. I will give it a try. What do you do with the debit card live it in the car? I am a single mother so living the house without it is not an option (in case of emergency).

    1. Thank you for your comment! I’m so glad you asked, I usually keep my debit card in my home, but as long as you are safe you could keep it in your car? I guess it depends on your neighborhood. OR you could just keep it with you at all times in case of emergency, but make a vow not to use it. 🙂 Hope that helps, Iman. Thank you for reading!

  5. This is such a great idea, I would never have thought of it! I consider myself pretty good at budgeting, but things are tight and anything helps. I think I may try this soon! I’m finding that I do spend a little too much each month, and I totally agree about the little things adding up. Thanks so much for the tip — I’m saving this on my Pinterest so others can see it too!

    1. When things are so tight, using a cash budget can really help. I hope you utilize it and that you can get your finances on track! Thank you for Pinning this post 🙂 I truly appreciate it! And for commenting, Scarlet. 🙂

    1. Thank you, Kristie! It definitely feels easier to just swipe in most situations, but by using cash and taking that extra time you can save so much money! I hope it works for you 🙂 Thanks for commenting

  6. This post is so informative and right on time. I plan on going back and reading some of your earlier post. Finances are big on both me and my husbands goals this year. I have listened to some of Dave Ramsey’s videos and podcast. I definitely want to start an emergency fund, get rid of stupid bills like a living room set we purchased on credit. We don’t have a ton of debt but enough to hold us back. I just hate living paycheck to paycheck. I will be sharing this with my husband FOR SURE! Thanks again for sharing!

    1. I’m so glad that this post was so helpful for you, Jeanette! That’s certainly my goal! 🙂 It sounds like you guys are really focusing on hitting the finances hard this year – check out my post today on emergency funds from today, you’ll probably really enjoy it! And stay tuned – we’ll have tons of tips for paying off your debt and then getting your finances straight once you do! Living paycheck to paycheck doesn’t have to be the case. 🙂 You’ve got this! Good luck, Jeanette! & Thank you for reading and commenting 🙂

    1. That’s a great idea! Even if you are using debit cards, giving yourself a very strict limit can help you to save money. Thank you for commenting & sharing, Dia! 🙂

  7. Cash budgeting is perfect for me: helped ALL THE FAMILY to be disciplined (including my husband, sst). It is simple and stupid so suitable for me. After 3 years of envelopes I don’t need these monthly because we are responsible now, but I consider it is a good example for a child.

    1. It certainly is great for kids to be taught these types of lessons throughout their lives! Your child will definitely be better with money because of it so it’s really great that you are teaching it to her. Thanks for commenting! 🙂

  8. Last year we started doing a partial cash budget (we can’t pay our rent or a couple other bills in cash) and love it! It’s so much easier, and when the money is gone it’s gone.

    1. That’s how we do it too. There are certainly things that are cheaper / can’t be paid using cash. Our loans give us a discount on our interest to be paid in debit so that’s how we do it – easy choice! That being said, using cash for the extras makes a HUGE difference. I’m glad you have found the same! Thank you for reading and commenting, Annie

  9. This is a really great system! I’m guilty of blindly swiping my debit card and those small purchases add up quickly! One of my goals for 2016 is to grow my savings and I think my switching to the cash system would greatly help achieve that!

    1. It’s definitely easy to do! I hate blindly swiping, but I’m so good at it – lol! I hope that the cash systems help you to reach your goal of growing your saving s this year! Keep following for a ton more tips to help as well. Thank you for reading and commenting, Shanna! 🙂

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    1. It’s so difficult if you don’t know what you are doing… Recovering can be hard. But once it’s paid out, it will be so nice. THank you for sharing / commenting, Violet!

  11. You looked inside my soul with your remark about wanting things, and wanting to go buy them RIGHT NOW. That’s my biggest financial fight with myself. I am not good at saving up for things, or just plain ol’ waiting. The cash envelope thing is basically what we do as well, with variable expenses. Great post!

    1. It’s such a big struggle, isn’t it? I always just want what I want right now! In fact, I feel like I NEED them. Waiting is so hard, especially in this day and age where instant gratification is almost a necessity… I’m so glad that you enjoyed the post and learned from it! 🙂 Thank you for reading and commenting, Cat

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