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With so many different types of budgeting methods, it’s hard to settle on one. Will the cash-only budget work for you?
Budgeting is hard. It’s not just about setting the budget, but about sticking to it. One of the things you also need to figure out is which type of budgeting you’re going to use.
The cash-only budget could be something that’s worth thinking about. This is especially good for those who spend and spend and spend without really thinking about where all their money is going. You end up putting it all on credit cards, or you go way over budget without really thinking about things.
You’ll want to find a way to manage that constant spending. This is where the cash-only budget comes in.
What is the cash-only budget?
This form of budgeting is just as it sounds. You get a cash allowance and that’s all that you can spend. You can do this with the envelope-stuffing form of budgeting as a lot of that involves spending in cash only as well.
There are some payments that are going to be electronic. Your rent or mortgage, car payments, insurance payments, and other automatic payments like this are all going to remain in your bank. That means you need to have that money available in those accounts. I suggest having a separate account for these payments. You move the exact amount from your pay into that separate account and let the automatic payments take care of it all.
The rest of your spending is going to be in cash only. You’ll take out your allowance and that’s all you have. You can’t use your credit cards—although they will be there for a genuine emergency.
Let’s talk emergency, though. This is for something like your car breaking down, and you don’t have the sinking funds to cover it. It’s not to pay for the coffee you really want after the gym. Read this article if you’re in need of a quick loan that can be approved online.
Does the cash-only way of budgeting work?
This is a great option for those with a spending habit. If you’ve tried other methods of budgeting and not found anything that works, you could try the cash-only budgeting. It’s going to take some time to get used to.
When you go to spend your money, you’ll need to think about whether you have it available. Do you have enough from your envelopes? Is there enough left over to last you the rest of the week or the month? It really makes you think about just how much you’re spending on a daily basis.
You will still have some recurring costs that are electronic. You still need to factor them in, and you’ll want to think about any electronic payments that you don’t really need, such as some of your subscriptions. It sucks to cut out Spotify, but for a few months, it could be worth doing it so you have just a little bit extra while you get used to cash-only budgeting.
After a while, you’ll probably find that you set goals for having a certain amount of cash left over. Or you’ll get better at making sure you do have money to be able to spend on something you want later in the week or month.
Who doesn’t this type of budgeting work for?
Cash-only budgeting isn’t for everyone. It’s not something that works for me as I don’t handle a lot of cash.
You see, I know what I’m going to be paid a month in advance and I can now budget with that in mind. I spend money on a credit card to get the rewards and then I clear the whole credit card statement off once I’m paid. I want the reward points since I don’t have to pay any interest at all.
If you like to get the rewards on your bank or credit card account, then you’re not going to see much of a benefit in going cash only. The same applies if you get cash back through apps or through a bank card. Stick to the way you make extra money—if you really do make extra money!
MORE: 5 tips to reduce your monthly outgoings
What type of budgeting works for you? Let me know in the comments below.
If you’re in Ontario, get in touch to find out how I can help you with your budgeting and investment needs.
