Cash budgetting

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.

Simply budgets program

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.

Cash budget system

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 !!!

8 comments

  1. Frgalmama says:

    Hi Libby, thats great! I also switched to moneybags (out of necessity). We have our own business (builder) and have to pay our own BAS and tax as we go and this was an absolute nightmare! Also cashflow is an issue depending on how much work Phil has on and when clients pay him. it was hard at first to build up reserves but it does get easier. i agree, you don’t want or need half as much as you think you do. i also think a goal makes you work more frugally – i have saved enough to take us on a holiday to QLD next year and that is such an achievement! Keep up the good work! Amanda

  2. Jody says:

    Libby, this sounds just like what I need. It is just so very easy to charge things and then deal with it at the end of the month. I think this may be my Jan Project!!

  3. Kez says:

    I always find the hardest bit is dividing up the money. I get our fortnight’s money out of the ATM which is only $50s and $20s – invariably I need $10 notes to divide it up and end up trying to shuffle money around! How do you handle that?

  4. Chantel says:

    Hi Libby,

    This is a good idea. I owe quite a bit of money and hoping to have it paid off by the end of 2009 which will make it a 3 year round trip to getting it sorted out. I think I need to write up an exel spreasheet to work everything out – is that how you started?

  5. Bel says:

    Hi Libby!

    So what stays home and what goes out in your bag, and are you always shuffling to and fro?

    And what about online purchases? I do some of my bulk buying, my organics order, gifts and other buying online… How do you work those electronic-by-necessity payments? I also pay all our bills online – phones, power, rates, rego, insurance, everything… I figure you still do that and this system handles the ‘everyday’ spending?

    Oh, we also have the type of mortgage where it’s better to have every cent in the account to reduce the interest paid each month, but if it’s just spending money I guess the difference wouldn’t be too great… What do you think?

    I have a couple of financial goals for 2009 and am looking into different budgeting methods at the moment. Thanks for sharing!

  6. Libby Withnall says:

    Hi Bel,

    I usually respond to questions directly but thought I’d share my answers here, in case it helps someone else.
    Okay, the only money permanently in my bag is groceries and gifts. The other money stays home unless I need it. I’ve known for a few days I needed to get to the pet store so I took the little tub out to my bag for when I went there yesterday. I do still have my cash card so if I really get caught out I use that and then don’t withdraw that money the next week.
    Online purchases. Yes, I make a few of them myself – just bought movie tickets yesterday. So next week I will deduct that from the entertainment money and transfer the amount to the credit card.
    Things like my organic delivery, bills, etc are in my budget as being paid on credit card. The Simply Budgets program makes this very easy.
    As to your mortgage. I thought like that about my credit card frequent flyer points, which is why I was so resistant to going to a cash budget. But I’m sure we’ve saved WAY MORE in cash than we would have earned in points. All I can suggest is that you give it a go – even for a couple of month, It is just my weekly variable spending money that come out – though at the moment I do have a few hundred dollars sitting in my tubs. Yes, I’m not earning any interest on it BUT I’m not putting things on credit card and getting more into debt. I really do love the freedom this system has given me. I’m not stressed about money and we have SAVINGS!!!

  7. Lisa Walton says:

    Hi Libby,
    Thanks so much for including this info on your blog for me. Sorry for the late reply but have been away over Christmas. I had noticed in previous photos that you were using Simply Budgets. Does it really work? Did you have a buffer of cash when you switched to a cash budget? I as checking out the Simply Budget website and they are now offering a Debtbusters programme. I was just wondering what one you were using?

    Thanks so much for your help.

    Lisa

  8. Libby Withnall says:

    Hi Lisa,

    I didn’t have a cash buffer when I started but it would have been better if I did. I had to move money around for the first month or so. If you don’t have the cash then you’ll need to spend as little as possible while you get started.
    I love Simply Budgets, in fact dh just ordered the newer version (not the Debtbusters program) so he could install it on my new mac. I would have bought the original around 7-8 yrs I guess – I seem to have had it forever. I really do love the program (and am REALLY missing it at the moment).

    Libby

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