Living on Less Than $28,000 A Year: How our family of six survives (and even thrives) on an income that is less than half the national median income, and what the government calls “below the poverty line” (less than $29,990 annually) for our family size. [Read other posts in this series here.]
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Today we’re talking about the Great Cash Debate-Do you spend less when using cash than when you use credit?
If you’ve read very many financial blogs or magazines, then you are probably quite familiar with the cash versus plastic debate. Using credit and debit cards is convenient, but studies have shown that using the plastic rather than cold, hard cash can cause you to spend more.
Dave Ramsey cites a study by the Journal of Consumer Research which found that frequent users of debit and credit cards not only spent more money at grocery stores when using plastic, but they also bought a lot more junk food than customers who used cash.
The Confession
I have to admit that even though we have taken Dave Ramsey’s Financial Peace class and understand the philosophy that “cash is king”, I have been slow to convert. We are 100% on the no credit card plan, but it just seems so much easier to whip out my debit card rather than stopping at an ATM to get cash for my shopping.
As with some other money saving ideas, I thought that the savings were not great enough to balance the inconvenience factor.
The Experiment
In the interest of science (or to interest my readers 🙂 ), I made a decision to try a cash-only approach with my shopping. For the last two weeks, I went to an ATM on my way to the store and took out the cash for my shopping. I must admit, it has definitely helped me to reign in the budget.
Both of my grocery shopping trips (see last week’s shopping here and the previous week here) were under budget. I realized that when I am not using cash, I tend to think that it’s okay to add things to the cart that we don’t necessarily need. When I had cash in my wallet, I could easily see that I would not have enough money left for my next two stores if I spent more at the first store.
Last week when I took my grocery money for the week out of the ATM, I also took cash to purchase some nonfood items we needed from Walmart. Again, I ended up putting a couple of items back because I didn’t have the money. I could have used my debit card, but I had to stop and think about it which helped me to decide that we really didn’t need those items anyway.
The Future
I have come to the conclusion that using cash definitely helps me stick to the shopping budget, so I will be taking the grocery and other shopping money out every week rather than using my debit card. Sure it’s a little bit of a pain to stop at the ATM, but I now see the savings from using cash only.
Even though I am a new “cash convert” for shopping money, I will still use the debit card for gas because I hate going inside to pay. I can see how using cash could help me to drive less and therefore save money, but I already limit my errands to certain days, so I don’t think it will save me much more. Who knows? There might be a “cash for gas” experiment in my future.
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What about you — do you use cash? Does it help you stay within your budget?
next post: Life (and financial) Lessons From Horse Camp
Click here to read other posts in this series.
Dave Ramsey actually recommends using your debit card for fuel to keep you from impulse purchases in the store.
Thanks for that update Ashley – we do use the card for gas but try to limit using it for other miscellaneous spending.
Interesting – I had not heard of that. Thanks for the tip Jo!
Some gas stations give a lower price for cash. They have to pay a fee for the electronic transfer, so they pass on the savings for the real green stuff.
Interesting – I had not heard of that. Thanks for the tip Jo!
We use a cash envelope system. The only money that goes in the bank are automatic withdrawals and the actual amount of each bill (such as power and utilities). If the amount is less than budgeted, then we take what’s left and put it in the correct envelope for those times the bill is higher or for those slower months since my husband’s income varies from month to month.
Sounds like you have a great system Becky!
We use a cash envelope system. The only money that goes in the bank are automatic withdrawals and the actual amount of each bill (such as power and utilities). If the amount is less than budgeted, then we take what’s left and put it in the correct envelope for those times the bill is higher or for those slower months since my husband’s income varies from month to month.
Sounds like you have a great system Becky!
We stay on a strict budget when it comes to gas and food. Our budget for food is $300 per month and we never go over it. Our budget for gas is $180 and we usually stay about $20 or so under it. There are 3 of us in our family. When our daughter leaves for college in a few weeks we will redo the budget to $200 a month for food and $100 for gas.
Good for you Karen!
I’m like you, reluctant to try it. However, I already got the envelope thingy that you can categorize things in, so that’ll be essentially the next step.
I’m definitely pro-credit card use. Obviously, keeping only cash forces you to stick to your budget. But if you can get yourself to do that without cash, the perks of a credit card can really add up. I keep a strict budget, but pay for everything (except rent & utilities) on my credit card. Since I’m careful to stick to my budget based on my income, I always have enough in my bank account to pay it off in full. Every few months, I cash in the points for a new appliance, a gift card to a clothing store, or cash towards my bill. I’m able to save money that would have gone those expenses. I have a Chase Freedom card and recommend it as one of the best points programs around. And if you’re paying off the entire balance every month, there’s no need to worry about interest payments!
One of the ways I stick to a budget is by telling myself “not today” or “not this week” when I want something that will push my grocery or clothing spending too high for the month. I remind myself that after the next paypay, I can buy it (if I still want it!) and I’ll have to make due without until then.
But if you’re not swayed, I think it’s important to have a credit card, even if it’s truly for emergencies only. You never know!
I am glad that you have found a way to make credit work for you Melissa. Unfortunately, most people aren’t as disciplined as you are.
The way that we deal with emergencies is to save cash into a separate account. Having to pay cash makes us think twice about things that might seem like an emergency, because we don’t want to spend the money. 🙂
First I was to say I love your blog and have found so many helpful tips to budgeting so I can prioritize my life better. I too have recently started using cash for groceries and it is keeping me from overspending. I have started trying to use cash for everything and its quite nice not having to keep up with as many debit card receipts.
Thanks so much Christan! Welcome!
Several stations around my area will knock 5 cents off per gallon if you use cash rather than a card, so I tend to do cash for that.
Re the CC, I am on a REALLY limited budget, and I have found having a CC has actually helped me save money…I don’t use it for food or general shopping, but I no longer pay late or even re-connection fees because I was late on bills while trying to round up the cash, and I am able to grab a much needed item while it is on sale, because I don’t have to wait til next week when I might have cash, etc etc. As long as I don’t whip it out to pay for my latte every time I feel like one, or yes, over load my grocery cart because I feel like I have more time to round up the money, I am calling my credit card a MAJOR help with my budget. 😀
On top of that, I like earning the points, to go towards plane tickets, so I can actually afford trips to visit my family!
I just came upon your website (through Pintrest 🙂 and one thing to beware of when using a debit card at the pump is that sometimes your bank will put a hold on your account until the transaction goes through. We found that out the hard way. We got $20 in gas, then went to Walmart, but the card was turned down. Embarassing, since I knew I had money in there. (not alot, but enough to cover what I had purchased). So we wrote a check, then went to the bank the next day to find out the problem.
My favorite teller told me about the hold and that it should clear up in a few days, but warned me that using outside pumps can create this hold. Now, I only use cash or go inside at the gas station.
Your bank may work differently, but it could cause you the same problem I had.
Thanks for the warning Jennifer. 🙂
I’m a teller and this is true except for one important detail. It isn’t the bank that puts the hold – it’s the gas station. The bank only receives the request for the amount, and posts it as a pending post to the account, to verify there are enough funds and take that amount out of the customer’s available balance.
The bank doesn’t take out anything more than the gas station tells them to. It is the Station that holds the funds and they do this, for some reason, to protect themselves. Most stations have a sticker on the pump to warn you of this.
I also always use a credit card at the pump for this exact reason; and also so that if someone has added a card skimmer they will only gain access to my credit card ( with my 0 fraud guarantee) vs clearing out my bank account.
Thanks for clarifying that Hannah. One of the reasons we have two checking accounts is so that we can have one account just for gas and a little for miscellaneous spending. If someone happens to get access to that card and wipe out our balance, it isn’t a big deal because we have more money in the second account that we can use until the bank returns the stolen cash.
By the way, as long as people check their bank account online every day, there is plenty of time to notify the bank of fradulent activity and the bank will return the money to your account within a relatively short time.
Yes that’s true. However you have to be careful if you’re out of town.
My husband used to travel for work, and I was leary of checking my bank account online at hotels, so I usually didn’t. One day I went to the grocery store and a couple small thrift stores, and the next day got a strange message from my bank about fraud. I logged in online at the hotel and found that someone was billing things to my account from Spain!
The bank got it taken care of, but if they hadn’t noticed and notified me I wouldn’t have known until we got home. Scary. I still think that someone had a skimmer on a machine at one of those little shops.
We only ever use cash. I cash my paychecks and immediately separate it out into individual envelopes that only I have access to. They’re labeled “Rent” “Gas” “Utilities” “Food” “Non Food Groceries” etc. And that has saved us money in the long run. I chart every purchase and have a running price book of how much each item we buy costs as what store.
A bit OCD but it helps with two kids and a full time job, you know?
I have a question regarding the cash vs. credit debate. My Fiance and I are getting married in December and we are working on building our credit so that we can buy a house next year. How would we build credit if we decided to go the no cash route?
Hi Anna! I am not a mortgage expert, but I do know that Dave Ramsey recommends Churchill Mortgage as a company that works with those who do not want to use credit cards. We qualified for a home loan through their company and have had no credit card use for the past 5 years.
It might sound strange, but even though I’ve read all the studies, I’m an outlier in this regard – the exception to the rule, if you will. I spend MORE when using cash than debit or credit cards. Sitting down and thinking it through, I’ve pinpointed the problem: cash money always seems like “fun money” to my brain. Since I can’t pay my rent, my water bill, my heating bill, my electricity bill, etc etc with cash. All of those thing require the electronic money stored in my checking account, which seems like “real, hard money” to my brain that is for responsible things. But cash? Green cash in my wallet? My brain interprets that as money to spend spend spend, because it would be inconvenient and somewhat difficult to turn that cash into bill-paying money.
So to each their own – as you said a few posts back about tracking your spending and knowing your “why” – as long as you know yourself and how you spend, you will know which approach is best for you. 🙂
Have you considered starting a food buying club with like-minded people in your area? We (about 30 families) order our food together from organic wholesalers and local farmers, and spend less than when we shopped for conventionally-farmed food. It’s super convenient and I can see exactly what I’m spending because we do our ordering on google drive spreadsheets.
Thanks for the idea Andrea. Before we moved we were a part of a co-op similar to this idea, but I haven’t found one in our new location.
Our family uses cash for variable expenses (anything that could change as opposed to fixed expenses like mortgage). I think the idea behind the Ramsey’s cash system is to not only spent with only cash, but to put the cash into envelopes at regular intervals and ONLY spend money out of these envelopes.
The magic of the system is 2 fold:
1. Your budget is entirely controllable (i.e. I can tell you how much we spend on groceries for last year to the dollar). I know at the beginning of each month how much I’ve saved, not the end of it (like most budget plans require). This makes it possible to plan your net income months or even years in advance. You can plan exact dates for financial goals like debt mitigation, savings, investment, etc.
2. The money is there to use when you want it. I personally don’t care about clothes, and my wife used to feel guilty about clothes shopping. Since there is a budget, there is no guilt. She spends up to what is in the budget, understanding that the money has been set aside for that purpose.
Our envelopes include:
– Groceries/Personal goods. $100 per person in our family.
– Restaurants / Entertainment. $40 per person in our family.
– Home (for furniture or decor). $150 per month (random number).
– Technology/Car (for car repairs, phones, computers, etc.). $150/mo (random number)
– Clothing. $25/mo per person in our family.
– Gifts (all gifts in and outside family). $100/mo (random number)
– Travel. $25/mo per person.
– Education. $100/mo (we homeschool as well and curriculum is expensive)
– “Blow” (or discretionary fund). Everyone in family has a little bit.
Auto-drafted expenses:
– Charitable giving.
– Debt.
– Utilities.
I hope this is helpful for someone…
See, while I totally agree with the premise, I am one of those rare people who sees cash in my wallet and feels like, yeah, I have money, woo! Whereas if it’s in the bank and I have to use my card, I’m more cautious because ideally, I want to keep that money right there in the bank where it belongs.
The important thing is to know what works for you, right? 🙂
My husband and I have a giftcard for gas. It works the same way with cash in that we cannot go over whatsoever but there is the added convenience of being able to pay at the pump. Each paycheck I put enough on there to get us through until the next paycheck. Sometimes there is a little extra that we can spend at the store (it’s a loaf n jug/king soopers card so it works for gas and groceries) or save it for the next two weeks.
I saw that you use your debit card to pay at the pump. I’m not sure if it works the same as with credit cards but it is very easy for someone to attatch a skimmer to steal your card number. The card readers on the pumps are very rarely updated so a skimmer could remain for a very long time.
Having a 3 year old and a 13 month old, I understand the hassle of going inside to pay. To avoid this my husband and I try to fill up only when we are together or someone can stay home with the kids. I would rather do that than have to deal with the horrors of identity theft.
We use our CC like an old fashioned charge card, and via an excel spreadsheet make a detailed budget that we update when needed (ie in the summer we up our utility bill for the additional usage for AC) and we pay the entire CC off at the end of each month. Because we get cash rewards, by putting everything on the CC we get about $600 back every January, perfect timing after Christmas spending! We have found if we’re dillogent about tracking spending daily and adjusting future spending accordingly we can stay on budget and get paid using our CC.
I wonder if it has anything do to with generations, but oddly I spend more if i have cash. Since I have had a job, I’ve always had direct deposit, and a debit card. I never have cash on me. When i do, it’s usually gift money that i received from someone for a birthday or something. So i spend it on whatever i want. Well i did when it was just me. Now it usually goes to baby toys and stuff. It doesn’t reflect in my bank account, so in my mind I didn’t spend anything.
Found you off of pinterest. Wow! Your blog is so inspirational. Been glued to the computer trying to go back and read your older posts.
A month ago my husband and I sat down and came up with a budget, goals and dream. It always sounded to restricting. My husband is frugal and I am the spontaneous and emotional shopper. Buying for the now. We came up with something sort of along the same idea as you. I started doing cash only. I found that my debit and credit card were just power to shop and add more unnecissary items to my cart. I each week get cash from the bank and add it to my envelopes: gas, groceries, clothing, entertainment, gifts, etc. I have not used my cards and don’t carry them with me any more. Cash has worked very well for me to keep us within our budget. It has been actually a fun challenge to see if I can save more on groceries and gas to have more on bigger items.
I have learned an incredible amount from you. I hope to add and tweak what we are already doing. Thanks!
Thanks so much for letting me know you found the blog helpful Amber, but it sounds like you’ve got it together! 🙂
I haven’t seen anyone else post this money saving tip, but I don’t think the idea is original to me…
I use a debit card for just about everything (because if I have cash on me, I tend to splurge on snacks), but when I’m writing down my purchases in my checkbook, I round up the amount of the purchase to the next dollar. So for instance, if the purchase cost $20.46, I write down that I spent $21 in the checkbook. It causes your checkbook to look like there is less in there than there really is, so you won’t spend that little bit of extra money. It doesn’t sound like you’re saving that much money, but over time, all that extra change adds up. At the end of the month, I balance the checkbook, and transfer the extra change to our savings account. It usually comes to $20 or $30 a month. Over the course of a year, we usually save an extra $250-$300, and we never knew it was gone!
Although I like your experiment, I do find I spend less with a credit card. I carry no cash except for $2 bills for parking (parking is cash only and cost $4). Using $2 bills for parking means I have to be really conscious of using it for another purchase. Anyway, I hate using my credit card for purchases less than $20, so only use it for planned expenses. When I carry cash, somehow it constantly disappears and before I know it I have blown through way too much.
Our grocery store allows us to scan groceries as you go, and I do use that to keep my grocery budget to $110 per week.
I really like the $2 bill idea Marge. Anything that makes you stop and think is good. 🙂
I still use my debit card. The closest bank branch to my house is about 15 miles away so I can’t bring myself to spend the time/gas to go there to withdraw money every week. I also tend to lose track of cash when I do have it… I like being able to track everything through my bank’s website and mint.com. But, anyway, I have a budget spreadsheet where I track spending in dozens of categories, and it’s divided up in two sections, one for each monthly paycheck. So, before I go out, I look at my spreadsheet to see how much I have allotted to whatever I’m going to spend money on. If I only have $57 left for groceries, then that’s all I allow myself to spend, even if there is more than $57 in my checking account. If I only have $42 for gas, I make sure I only put $42 worth of gas in my car, as much as it pains me to not fill up all the way 🙂 After I get home, I go back to the spreadsheet and deduct what I spent from that category, so it always has a running total of what I have left.
The spreadsheet also has a total amount, to show how much I have left to pay bills vs how much I have in my checking account. In my fantasy world, the day before payday I would move anything that’s leftover in the checking account into savings (in the event I came in under budget), but I’m still working on doing that instead of spending the extra on a dinner out or some new clothes 🙂 Also in my fantasy world, my spreadsheet amount will always be less than my checking amount, but sometimes I go over my budget so I either have to reduce a payment on one of my debt-payment items (I pay more than minimums on all), or put money from savings. Also working on that too!
We did the cash thing for a while, and it may have helped, perhaps I need to do your experiment. I really think the planning is the biggest thing that helps though. We are a family of 8 and we have consistently been down to only 5-6 at meals lately because of dh working out of town, and various teens at various jobs / camp etc. We are still spending close to three times what you are spending on food. I find that CRAZY because I DO alot of the stuff you say to do – buy in bulk, have a left over meal (in fact we pretty much JUST do leftovers for lunches – with an occasional prepared lunch and an occasional ‘sandwich’ lunch) we are vegetarian, so the expensive meat is not a part of our diet (though some of the ‘replacement meats’ are MORE expensive, we use them sparingly!) – – I HONESTLY think the biggest factor is that I have fallen away from my ‘one trip a week, with well planned menu’ practice. Clearly I need to get back to that!! Having fewer people here has sort of made me think it was ok to ‘fly by the seat of my pants’ (that and summer vacation) We have also been eating out a bit more, because it’s ‘easier’ when there are only 5 to buy for. Well, clearly it is still not helping the budget. Thanks so much for the reminders and suggestions. Maybe I need to go back to cash – I don’t even have the ‘it’s a pain’ excuse, because my bank just put in a new branch that is between my house and ANY store I would shop at – literally on the way to town. I DO track our spending VERY closely and have a Dave Ramsey style “Zero Balance” every week. But still, finding new ways to SAVE is ALWAYS good – I’m gonna WORK on getting that food budget amount under control!! You feeding six with a GF in the mix (which we have too!) has inspired me!!
What about still doing the planning like normal and shopping once a week like normal, for dinners only? Still cook as if everyone is there, but then with the leftovers, have those for lunches instead of doing something different for lunches the next day. Then, if you still have leftovers later in the week, have a “clean out the fridge” night where everyone just eats whatever leftovers are, well, left over 🙂 For planning purposes, you could still plan an easy meal (something like grilled cheese and soup) for that night in case there’s not enough leftovers to eat that night, and then just not make it if you have enough.
Great idea Julie!
I have to say I love the idea of “Cash is King”, I have a good friend that swears by it. But it just doesn’t work for us. Right now we use an EBT (food stamps) card for groceries. For other purchases we use the Costco American express card- 3% back on gas! Target gives a 5% discount. Discover also has great benefits. We always pay it off every month. If we know we can’t pay it off… we don’t buy it.
While it’s true I spend less when using cash while grocery shopping, I don’t for 2 reasons. 1. I hate carrying around large amounts of cash since I’m shopping alone or with my toddler, and 2. the change can give the impression of “extra” money, which is a temptation to stop for lunch or to get a drink on the way out of the store (especially on these hot days we’ve been having!) Also, I hate that I can only get cash in $20 increments at the ATM. I always have to take out more than I need, so it either sits in my purse or I have to remember to put it BACK into the bank the next time I make a deposit.
Oh, and I totally agree on the credit card thing. We do not have, and never have had, credit cards. We pay bills directly from checking or I write a check. We use debit cards for gas, shopping, etc. I have a separate account for my Pampered Chef business and that operates as my “fun money” for going out with the girlfriends every now and then and helping pay for my pregnancy related dr bills.
Having gone from a family of two to a family of 5 in just over a year (yep, I have 16month twin boys and a 2 month baby girl) finding ways to save more on our already conservative budget has been a challenge – so thank you for your blog!!!
My husband and I are both frugal – I was dubbed the scrooge of my family when I was only 5-6 years old… I just like pinching my pennies and am loath to see them roll away.
I think because of our personalities, we actually do extremely well with credit cards. We have a budget, pay off the card each month, and can track all of our spending to the penny on Mint.com.
Our card is a points card -so by buying all of our necessities (groceries, gas, DIAPERS!, etc….) we earn on average one- two gift cards a month. We typically get restaurant cards so that we can have a FREE treat of eating out (I think it is important for kids to learn proper behavior in public from an early age – people get that terrified look as we walk in ‘THREE BABIES, AHHHHHH!’, and when we leave the boys are always complimented on their good behavior). If we know that clothes are getting worn out, I’ll get a store gift card instead to replace an item or two (we do have clothing as a line item in the budget, so this is used for those unexpected clothing needs – or sometimes a gift.)
So credit can have its benefits – but only if you have the personality to be dedicated enough to the budget to not overspend.
Sounds like you are making credit cards work for you, but you are right that you have to have a disciplined personality to do so.
Good for you also for teaching your children to behave in public. We trained our children when they were younger as well because we want them to be a blessing to others. Many parents don’t realize how their failure to discipline their children affects others around them. It is frustrating to have a rare dinner out only to have it interrupted by an unruly child that parents won’t deal with or remove from the restaurant.
Thanks for taking the time to share what works for your family.
We use cash. What I love about it is that before I go to the store I have already figured out what the typical prices are (written right on my grocery list) and I know that for the two weeks I have $140 in my envelope. Usually my prediction of cost will be about $135 because I like to leave a few extra dollars for that second week in case company is coming and I want fresh veggies for salad or if we need an extra gallon of milk. BUT. I make a deal with myself while shopping that whatever cash is left in my envelope beyond that extra $5 after shopping gets immediately “deposited” into the date night fund. The fact that I might be able to add a few bucks to our next date night is instant incentive for me to stop at the service desk on my way in the store to flip through the extra coupon box that sits there or to pick a slightly smaller package of ground beef.. or to choose the store brand cream cheese over my coveted Philadelphia. So cash definitely does help me. And it definitely keeps me from going over by a few dollars too.
As for gas, we save 5-10 cents a gallon by paying with cash. We don’t actually see that money because we budget a set amount each week to put into the tank but I’m sure it adds a few extra miles to each tank. We have 2 vehicles, one is a tiny economy car that the husband commutes to work with and we put $40 in that one. The other is a minivan and we budget $10-20 in that each week, depending on if we are in dance class season or not. I hate running in to pay because I’d have to leave my little ones in the van or drag all three of them in with me.. so we figured it out that since my husband grocery shops with me we put the gas in that night and I stay in the van while he pumps gas. 😉
Love the motivation of putting extra grocery money in the date night fund!
Thanks to Dave Ramsey’s FPU – which we finished just a month or so ago – we’re on an almost exclusively cash plan. Clothes/groceries/spending money/household needs/etc. (i.e. normal day-to-day expenses) are paid with cash. My “secret” is a zippered cloth pencil pouch from Wal-Mart/Office Depot, with several labeled small bank envelopes inside. Too bad they only sell those pencil pouches in August!
Notable exceptions to cash:
-Our regular utilities bills are paid via our bank bill pay.
-With my 1-year-old, as others have said, paying cash for gas doesn’t make sense to me. Our local pumps don’t offer cash discounts. I just keep track on our weekly allocated budget sheet.
-We DO use a credit card, because we get 1% back on our mortgage for all our purchases. Since taking FPU, we only use it for gas, Netflix, our health insurance, and a few other fixed-amount monthly items, and I pay each expense off AS SOON AS it hits the card – I don’t even wait ’til the end of the month. My statement balance usually says $0 (unless something hit the day the statement closed). For us, this eliminates the potential credit card “inflation” in spending (since they are fixed expenses), but also has earned us about $50 in principal payment on our mortgage so far this year. Every little bit helps, right? And because I’m very Type-A, detail-oriented… I don’t have issues with running it up or hitting debt mode.
-Every once in a while, an online purchase will be made with the credit card. But ONLY when the money has already been allotted – and then I just pay it off right away and take out less cash for that category.
It’s cool to see how a different system works for everyone, but like you always stress – the important thing is to find the system that works for your family and stick with it. Thanks so much for sharing your experiences living on less!
I agree with you–it is interesting to see that different systems work for different people. I like that people are sharing their ideas here so we can all learn, like your pencil pouch idea. I never thought of that, but it’s a great idea!
Sorry if someone already posted this… I started this when I was a poor student in undergrad trying to not take out student loans. When I go grocery shopping I take a calculator and add as I add items to my cart. It keeps me in check throughout the store, rather than when I get to the checkout. I have tried the cash thing and I don’t save any more than with a credit card as long as I use the calculator. If i go without the calculator and my list I typically spend $20-$40 more and I’m shopping for a household of 2!! And I can’t take the credit – my mom has been doing this for 40 years! Thanks for all the tips!
Also – using the memory plus feature on small cheap calculators rather than just a running total avoids errors!
That is a really smart idea Kristen. Thanks!
Discovered your series today, and read ALL of it! Such great ideas! Thank you!!
I do not use the cash method. I worked at a bank for several years, and as the vault teller it was my job to count weekly currency deliveries from the Federal Reserve. Spending several hours a week counting over $300k, cash has become nothing more than paper to me. I spend it like nothing, b/c I became desensitized to it’s value.
I am much more of a numbers person. I have a monthly budget that I have been working off of for several years. I know what bills need to be paid with each paycheck. The bills always get paid and on time. However, it’s the “extra” that gets us into trouble. We have no idea where it goes. And somehow we find ourselves broke at the end of every pay period. So I am going to try out a few of your methods (Freedom Acct!) to track ALL of our money, and focus on paying down our debts with the “extra”! Thank you so much!!!
You are very welcome Jennifer. 🙂
I would like to start off by saying that I have read your whole series in a week and I like your points and ideas you have made.
I went through Dave Ramsey’s Financial Peace University two years ago and have been living close to it as possible. I have gotten away from the cash in the enevolpe method but, I have made a spreadsheet that keeps track of our expenses. I know what my husband makes weekly on a 40 hour week. So I have put that in and have subtracted everything that needs to be paid for the month. I add in the utility bills when I get them. So I know how much I have extra every week. If he works extra hours each week (which he does) that goes to paying off medical bills or something else.
I shop at a grocery store that helps me save on gas. I can save up to a $1.00 a gallon on my gas if I save my points which I do at times. With my spreadsheet I know how much I need for gas each week and take that money out of the back and put it in an enevolpe in our car (we only have 1 at the moment) and know that is all we have for gas that week. It helps us plan our errands.
I use my debt card often, like most of your readers if I have cash I tend to spend it on a quick bite at a fast food place or my 3 teenagers and 9 year old will want it so they can go to the store and buy candy. So I limit my cash on hand as much as possible.
I would like to add that I have an app on my phone that helps me keep track of my spending when I use my debt card. It is awesome.
Again thank your for you time in sharing your ideas.
For keeping track of my grocery bill while shopping with kids, I use an app on my iphone called grocery IQ. It allows you to make lists for seperate stores, add quantities, prices, and a lot more I haven’t even used. You can also rearrange the order of the aisles so they reflect the stores you shop at (took a little time to do, but I love the convenience of not having to backtrack for something on the list). I find shopping so much less stressful when I already did all the thinking and my shopping trip is just gathering. I just have to check off the items as I get them and possibly change the price which takes 2 seconds. I bring library books for my kids to look through and, of course, a snack! My kids were three and five when I started using this.
That sounds great Sarah. Thanks for sharing!
I haven’t found a way to go cash at the gas stations, I’ve got three babies/toddlers crammed in the back of my Camry and I’ve heard of police making examples of moms who get out to put clothes in a Goodwill bin a few feet from their kids/car. Full-serve is substantially more expensive, and I also live in an area where you’re charged more for using your card. I guess time is the only answer here (though I’d pay the extra $ to keep them tiny!) 😀 Thanks for a great resource, btw!
We use cash at times, but we get cashback at the end of the year for using one credit card, and points towards free groceries for using another card, which are the main reasons we still use credit cards often. We just need to be more disciplined as to WHAT we buy! Lately we’ve been planning more and more meals from what we already have, and trying to stick to lists more at the store as well. We’re been reading your posts and really enjoying them. We;ve been working hard at killing debt, and look forward to one day being debt free!
I often have the “great cash debate” with myself too. I have studied Dave Ramesey book and understand his idea and it makes a lot of sense. However in the past when I have tried it and took out the cash from my husbands paycheck for all our “envelopes” it just ends up a mess to me. It seems to go faster and then I am out all our cash and have no idea where it went. We always say we need to keep track of the receipts so we can see, but that never happens. We also have the bad habit of borrowing from other envelopes, then again the money is gone and I have no idea where it went. I know we spend more carelessly with our debits, but I do like how I have an electronic record of our spending that way. Dave Ramsey has such a good and simple plan, I wish I could organize our life enough to be able to follow it bc I’m driving myself crazy !
Ironically, I work at a bank and never have cash! Each payday, I take an envelope and write $150 on the outside. This is our two week grocery/household budget. Each time I use my debit card to purchase grocery/hosuehold related items, I subtract the amount on the outside of the envelope and put the receipt inside. Instead of using my pin number for my debit card, I select credit for signature transactions so I can get double the reward points. I already have over 6,500 points for the year which will come in handy when Christmas rolls around. I find that if I have cash, I am more likely to spend it on impulse items such as soft drinks, candy bars, and fast food during stressfull work days. This keeps both my budget and my waistline in check, lol 🙂
I like that idea Faith. You are still keeping up with your spending as if you were using cash, so it keeps you in line. Thanks for sharing. 🙂
I DO seem to spend less when I have cash – but the points are my motivation NOT to do cash. My credit union gives points for using my debit. Every holiday I have points to get various gift certificates for the nieces…. I DO need to learn discipline. I would love to live CC free….
I have a separate checking account with debit card I use for groceries. It is a no fee checking account with no minimum balance requirements. I merely transfer the amount of money I have budgeted for the month for groceries into the separate account and that is all I have available to spend on groceries. I cannot spend more than what is in the account.
In order to add money I would have to physically log into the account and go through the process of transferring the money into the grocery checking account. I have never had to transfer more money into the account and at times I do not even spend what I place into the account for the month.
I then transfer what I did not spend into a savings account and do not carry it over into the next month. It has worked for me so far. Carrying cash is not really ideal for me.
Good idea Robert. Thanks for sharing with us!
I had a question since I was debating getting a new credit card that would earn some rewards. Many of my automatic payments and online purchases (airplane tickets) are done on my credit card since I thought it was safer. What do you do/recommend?
Our family has decided against using credit cards EVER. I know there are people who are very disciplined and they say it works for them. I just don’t want to ever be in debt again.
As far as using the credit cards for travel, I have heard Dave Ramsey say that everything that you can do with a credit card, you can do with a debit card. We personally have found that we were able to purchase airline tickets and rental cars with our debit card. Rental car companies do place a deposit hold of several hundred dollars on your card though, so you want to make sure you have a large balance. I wonder if opening a second checking account just for travel expenses would be wise.
I can’t give you professional advice, but I am just sharing what we choose to do. Good luck with your decision.
Automatic payments can be done through your bank with online bill-pay options. (Even our student loan payments come out of our bank account). And if your debit card has a Visa or Mastercard symbol on the front, it can be used the same as a credit card. My hubby and I had HUGE amounts of credit card debt (over $15,000!) and after 3 years it is all paid off. We now have no credit cards and use our debit card for everything. Because a debit card is linked to your bank account, you really can’t spend what isn’t there, yet you have the convenience of a credit card.
We definitely spend more with the debit card than with cash (we don’t use any credit cards). I keep a running tally with calculator or paper if I’m using cash and rarely put extra items in my cart. I think it hurts more to pay with cash but it’s the only thing that keeps us on budget.
I always use my debit card for gas because I don’t want to go in with three kids and we don’t stick to a strict gas budget.
Tabitha – it is hard to keep the tally with 3 kids in tow so, like Kimberlee, I try to shop alone or I send my husband late at night by himself. As far as diapers, etc., I have one budgeted amount for everything I buy at the grocery store and if I have to buy more diapers, then I have to adjust my meals to something less expensive that week. Good Luck!!
I am not a mother, nor a wife, but a poor college student and I have to say that your tips are EXTREMELY helpful. I also sent this blog to my boyfriend who just recently started renting an apartment for medical school and he loves you posts too! We are really excited to start using these tips to help out our financial situation. I really like how this series is really all about how to live comfortably WITHIN your means and not outside. This is great and please keep up the good work!
Thanks so much for letting me know Alexx. I wish that I had listened to financial advice when I was your age. Good for you for taking control of your money at a young age! 🙂
okay so I have to ask those reader who have young kids – how do you cash shop with young children? I have a general budget for each month, make meal plans and shop with grocery lists but I am nervous about two things: one – I cannot keep an exact running list of cost with three children in tow and two – sometimes we go through more diapers, milk, wipes and honestly more food depending on the month. Any thoughts? I am about saving money but am not sure if it is worth the stress?
Hi Tabitha! My kids are older now, but when I had four children 5 and under, I did everything in my power to find childcare so I could shop without them. I traded with friends, bartered Spanish tutoring with a neighbor’s teenage daughter and asked my husband to keep them when I couldn’t find anyone else.
If you do have to shop with them, I would say take extra cash until you get a feel for how much you need each week. Using cash may not work for you at this point in your life, but maybe you could give it a try and see.
Other moms, feel free to chime in. 🙂
In response to Tabitha:
Quote from Kimberlee: Using cash may not work for you at this point in your life, but maybe you could give it a try and see.
One thing to remember is that maintaining any budget requires discipline, and using a cash budget requires extra disciple. As Dave Ramsey has said, keep some extra cash for “blow” money, because your first few months of cash budgeting you’re bound to overspend a bit somewhere, and that is where your blow money makes up the difference. My hubster and I have been doing a cash budget for almost a year now and it continues to be difficult to stick with it. (We’re trying really hard to be frugal so we can have another kid, but that involves buying a new car, which we also want to pay for in cash). We keep trying the cash budget because even though we may go over a little every month, we still end up saving more money than when using strictly debit cards.
Also, Ramsey also says that your budget may change monthly. Example: it takes about two months for my infant to go through her Costco box of diapers, so every other month I must budget an extra $36.99. Wipes take us four months, so three times a year I budget an extra $19.99. Our city bill comes every other month, so come months we have an extra $69.88 to save. During birthday months we increase the amount in the “kids” envelope. What you spend every month does change, and your thrifty budget should reflect that. 🙂 Happy saving!
I keep track of costs of food items and shop the ads. I have an appointment with myself the day before shopping to plan out the weekly meals and put together a shopping list in an excel file. I include the per item cost and the number of items and let excel sum everything for me. I access this via google docs on my phone but you could also print out. I find it much easier to stay on budget this way- because I know what the bill will come to with tax- no calculator needed!
I make a planning appointment with myself too. It really helps. 🙂
Having the Financial Peace wallet helps a lot because the cash I carry with me has designated envelopes. Oh the guilt when I pay for groceries from the gas envelope. Also, on the gas topic, I estimate how much it will take to fill the tank or play a game trying to figure out where on the dial my tank will get filled with $50. If I have to stop and pump my own gas I just give the clerk and only put $50 in. No need to get change.
We use cash for church offering, Christmas & misc gift giving through out the year. I started saving that earlier this year when I had to dip into Christmas to fund DS bday party last year. And it has been great, I even had some $$ available when I got an unexpected graduation invitation because of that Misc Gift envelope 🙂 We also use cash to save up for our property taxes. I get cash for my twice monthly allowance, while my husband gets a deposit into his personal checking account. We also use mostly cash for groceries, but my diet has recently changed so our bill has gone up somewhat. If, for whatever reason, I go grocery shopping before I get cash, I just subtract out the amount of the grocery bill from the cash I withdraw. We use our debit card, automatic draft or bill pay for everything else. Unfortunately we do have some large anticipated medical bills coming up, and we will be putting them on the credit card. Our goal is to keep up with the large payment we are paying now so that the balance doesn’t go up too quickly and we can pay it off early next year. Once it is paid off, we hope to lock it away for emergencies only and ultimately cut it up.
We use cash for just about everything. We cash my husband’s check and have envelopes for each item. Yes, we do spend less when using cash because we have to make sure we have enough to make it last. Also, as mentioned above, two gas stations now offer discounts to those who use cash. We use that for gas also as that is one of our envelopes because my husband makes deliveries and is self-employed. Three percent savings on gas adds up. I did have a $500 credit card for a while–I always bought what was needed and paid it off every month.BUT my hubby does better on a much stricter budget! 🙂 We don’t use credit at all–and rarely use debit except online.
In my state, some gas stations offer a cash discount. We also receive a discount for paying in cash at several other stores. So, in those cases, we definitely use cash.
Not sure how using cash for groceries would impact us – interesting thought!
I am torn about this because, even though I think it might help me control impulse spending to a small extent, I’ve used the points from my amazon.com credit card for the last three years to buy gift certificates for my husband’s family at Christmas time. I’d hate to give that up.
Agreed–I actually live by “Credit is King” and charge absolutely everything (unless the store doesn’t take plastic or, if I happen to have money in my wallet, if the total is less than $5 I might not charge it).
Over the past five or six years I have gotten at least $700 worth of rewards (gift cards to specific stores or just ‘cash back’). I am fairly good at moderating my spending on my own, though, so this might not work for everyone. I consider this free money and I wouldn’t want to give it up!
I guess the tricky thing is that if you use credit all the time to get the rewards, you have to be really good about paying off your bill in full every month. I have been careful enough about my spending that I never carry a balance.
I’m on the credit card kick too. One, it keeps your credit score up if you use it responsibly, but the reward points are the real reason. This method is DEFINITELY! not for everyone, but I think I have gotten the “something for nothing” method, as I call it, down to an art! Right now my discover has zero percent until Oct 2013. I used it to purchase my first ever bedroom set (sleigh bed! YAY!). I then used the reward points to get three $50.00 gift cards as Christmas gifts ($45 worth of points for each card). With the exception of this card (which will be paid off long before the promotion ends), the other cards are paid after the charge is made. I use the free checkbook apps on my phone and keep up with what I spend never charging more than I have money to pay back comfortably. I NEVER pay interest on my credit cards because the rates are WAY too high. The only debt I have at this point is my mortgage.
My husband and I use a cash budget. We have special zipper purses for each budget area, with a predetermined amount of money in each one. I get out all our money at the beginning of the month. Using cash definitely helps us stay on budget, but it does take a ton of discipline, and sometimes by the last weekend of the month we are not going “out”, but riding bikes or playing in the sprinklers with the kids. We keep all money in our safe when not using it. This helps us shop more intentionally and less impulsively. (If I don’t have the money purse labeled “kids” with me, then I don’t buy the extra sippy cups I think would be nice to have). I have my own account from before we were married, and I keep that debit card and the credit card in the safe as well. We don’t use cash for gasoline, because I’m simply not going to stop driving simply because I’m out of gas. I plan my trips responsibly, but if I need to fill up before a play date seven miles down the road, then that’s what I’ll do.
We are a cash-only family. We have never had a credit card, so I honestly don’t know if I would spend more if I had one or not. My mother is very disciplined on how much she puts on her credit card and pays it in full every month. I have known other people, though, who tend to spend more when they use credit. I suppose it depends on the individuals personality, how they were raised as far as finances/credit are concerned, and their budget.
Frankly, I find that when I have cash, I tend to buy little snacks more often. If I’m at work and feeling a bit peckish and have an extra dollar or two, I’ll go down to the vending machine or convenience store and grab some Oreos or Cheez-its. When I don’t have cash, I just suck it up and wait till I get home to have a snack. As for grocery shopping, we use our debit card. We have a very strict budget, and my husband and I plan all our meals for the week and go grocery shopping just once that week. While shopping, we have 2 calculators going, so that we don’t go over budget. To be honest, I spend more when I have cash than when I don’t, so I never carry cash.
I have that problem when I have loose, undesignated cash. When I have a specific amount in an envelope dedicated to a particular thing I do better.
i find the same. i’m worse about buying those extra snacks and im so strict with money in the bank cuz i like my account balance growing 🙂
Ditto with lauren and becky
I have to say that I am very good at staying my my weekly shopping budget! I take $50.00 out of each pay check and only plan on spending $30.00 per week and adding the additional money to my reserve grocery fund which I use to pay for the items I purchase in bulk such as meat, and pantry staples.
I do use my debit card because we actually receive reward points for using the card. By using the cards we average a $50.00 gift card every 2-3 months to a store of our choosing so it benifits us to us the card!
We do not do the credit card thing at all!
No, I don’t use cash only, I am disciplined on the amount of $$ I have to spend and absolutely know if I am overspending. Unfortunately I miss a lot of really good deals to stockpile but I am still within the budget.
cash helps me too. I have gotten out of the habit for getting the weekly cash, but it does help me too.
I have just cash for everything for a long time. I always go to the atm on paydays and get all the cash at once to use for anything that isn’t bills. For gas I typically do my shopping at Walmart so I use my gas cash to put money on a gift card and stop at the Walmart gas station to get gas plus you get 3 cents off per gallon. It really does help me to stay within budget and not spend the extra money in the checking.
I think you read my mind!! I just put my credit card (which I get great points with) in my safe so that I don’t overspend!! Here’s to trying to shop with an 18 mo old and calculator 😉
Lots of snacks Melissa, lots of snacks! LOL!
Great Kid Freindly hands free snack. “cheerio” Type cereal on a bit of yarn as a “Necklace” Kids love it. I use it in the car all the time!
Excellent tip about the “necklace”! Love it – thanks for sharing! 🙂
We do use cash, for most of our normal grocery-type budgets- pet food, non-food items, gas, etc. We are lucky that there is a gas station in town that allows you to pay cash AFTER pumping, so I only have to go in once. Sometimes it’s a drag, but it definitely helps.
What has helped us is also having a envelope at home labelled “Bank.” If we are in a bind and really would prefer to use our card, we automatically move the money from the envelope it should have come from, into the “bank” envelope. That limits us from overspending also, because we know we have to move the money when we get home. We just weren’t willing to not pick up something we need on the way somewhere just because we didn’t have the cash with us. We don’t do this often, but it a couple of times a month it is very handy!
At the end of the month, when we go get our cash budget money out, we count it as taking out the total amount, but take out less the amount that is in the “bank” envelope. That way it all balances out in the end!
It may not work for everyone, but we find it as a great solution to not always having the cash with us.
Thanks for the idea Laura. 🙂
In my area many gas stations charge extra for using a card or have special discount days for cash. It may be a small amount, but with gas over $4 in my area it can help.