I’ve mentioned a few times about how we’ve moved over to a cash budget and one of my readers asked for some more details.
I’ve being using the Simply Budgets program for a number of years now and love it (if you need to change any amount it does all the work for you and you can see your cash flow for the coming year). Any budget program will do but you do NEED a budget. However, having a budget and sticking to it is another thing. In fact, we were not able to EVER stick to our budget while putting most purchases on credit card. Yes, we did pay off our credit card every month but I was continually having to rework the budget to be able to do this.
During the year I started watching Till Debt to us Part and the first thing Gail does is put her “clients” on a cash budget. Eventually getting sick of continually running out of money (the crunch came when Kevin had a $1000 dental bill and we had no SAVINGS), I decided we’d try the cash budget.
I bought seven little containers for our main categories – Beauty (covers skin care/makeup, hairdressers, beauticians), kids, entertainment, clothing, household, pets and Libby (personal spending money – mainly for magazines and books). I also have a small purse for groceries and gifts – these stay in my handbag.
I added up how much money I needed to withdraw each week and once a week I’ll get my money and divide it up. Some categories – like food – get used up weekly, but most accumulate so I can buy things when needed. Our bills, like water, electricity, etc are still paid on credit card and paid off monthly.
The first few months were a little tough and I had to shift “cash” around from one container to another. This was mainly becuase I had to accumulation to start with. Now as you can see there is quite a bit of money in some containers – I’ve been especially working on the entertainment one so I’ve got spending money for the school holidays.
Now that Christmas is over I expect things to really settle down. I don’t like parting with my cash now so I really do think about my purchases. Just the other day I told Christy I’d look for a new Christmas book (to replace one that was damaged). The one I liked was $32 so I quickly put it back on the shelf. A few months ago I would just have bought it on credit card.
The best part is not only do I no longer have to rework the budget to accomodate my overspending but in the 4-5 months we’ve been doing to cash budget we have managed to save $5,000!!!!! Some is in my travel account, some in long term savings and some will pay for my new kitchen table.
Honestly, if you have trouble sticking to budget I suggest you try a cash budget. I was a doubter for many, many years but this is only thing that has worked for me. And you know the crazy part? Even though we have had to say no to buying things we really haven’t done without. I don’t feel like I’ve been deprived. I’m not wanting. Which just shows that that $5,000 we’ve saved would have been spent on stuff we really don’t need !!!