Mar 182013
 

Our Cash Budget

When reading about our various cash-only adventures, people sometimes asked how we budgeted our money to last the whole month.  There are probably many different ways to manage your money when adopting a cash-only lifestyle, but here’s the method we chose: Before we began, we created a written budget that showed all of our monthly income, and then listed all of our savings goals, monthly bills, and spending categories, as well as how much we wanted (or needed) to spend on each.

For example, we listed “Braces- $200″ as a savings goal because that was the amount of money we wanted to save each month in order for me to get braces eventually. “Gas/Electric- $300″ was listed as a monthly bill, because that’s typically what our utility company charges us. “Groceries- $350″ was listed as a spending category, because that’s the limit of what we wanted to spend each month on food.  We made sure to balance the written budget so that our savings goals, monthly bills and spending categories wouldn’t exceed our monthly income.

Every paycheck, we took three steps:

  1. We transferred all the money needed for savings goals (retirement, future travel, braces, cushion fund, etc)  into savings accounts. 
  2. We withdrew enough cash to cover our shopping for the month, and separated that cash into envelopes- an envelope for grocery money, an envelope for drugstore purchases, an envelope for haircut money, etc (this is commonly called “the envelope system,” or “envelope budgeting.”
  3. The money left in our bank was used for monthly bills, which we paid using our debit card as the bills came due.

Now, this 3-step process looks pretty simple, but going cash-only was a lot harder to put into practice than we originally thought.  I’ll admit, I wasn’t fully prepared for just how hard it would be to make the switch from credit cards.

The Addiction to Credit Cards

As someone who routinely used credit cards to make purchases, I had forgotten the logistical issues inherent with using cash: the frequent trips to the ATM, the careful allocation of cash into various spending categories at the beginning of each month, the panic at the cash register wondering if I brought enough cash with me.  After switching to credit cards over a decade ago, I think I had assumed that it would be easy to switch back to cash if I wanted to, and that the only reason I didn’t was because of the benefits of cash-back credit card rewards.  After all, since I paid off the credit cards in full each month, I wasn’t dependent on them, right?  This logic reminds me of a friend of mine who smoked cigarettes and said, “I’m not addicted because I could quit any time I want to.”  The response in both cases is, “Uh-huh.  Get back to me about that after you’ve tried.”  We simply can’t know the level of our addiction until we try to kick the habit.

And credit cards are a hard habit to kick because it’s incredibly convenient to use them- you never have to worry if you have enough money in your account to cover the purchase, you have over a month to figure out how to pay for the purchase, and you don’t have to make detours to an ATM (well, except for when you find yourself at one of those lunch joints with a hand-written “cash only” sign taped on the cash register).  My husband and I loved the convenience of credit cards, but nonetheless we found ourselves embarking on a three-month cash-only challenge.  You might remember from reading Part I of my Cash-Only Challenge Series that we were initially reluctant to go “cash-only”- we were essentially forced to do it so that our credit reports reflected $0 debt for an upcoming house refinance.  But when faced with the reality that we had to temporarily wean ourselves cold-turkey from our credit cards, we did try to embrace the concept, and committed to trying out a cash-only lifestyle for a full three months.  I’d been intrigued by the case made in The Money Saving Mom’s Budget that a cash-only lifestyle leads to financial betterment, so I convinced my husband that we should give it our all and see if it was really worth it to kick the credit card habit and pay for things the old-fashioned way.

Now the three months are over and it’s time for me to report back on the ultimate question:

Was the Cash-Only Lifestyle Worth It?

Stay tuned for Part VI where I’ll answer that question and disclose whether we’ve stuck to the cash-only lifestyle!

Want more?  In Part I: The Accidental Players, I explain how we wound up in this Cash-Only Challenge despite having no interest in a cash-only lifestylePart II: Grocery Budget Jitters tracks how we weaned ourselves from credit cards and took the plunge into using cash.  Part III: The Roller Coaster, tracks my logistical acrobatics (and occasional panicked moments) as I attempt to cover all of our month’s expenses before our cash runs out. In Part IV I report back on taking our Cash-Only Challenge on vacation with us.  

Interested in doing a Cash-Only Challenge yourself?  Check out Crystal Paine’s book, “The Money Saving Mom’s Budget” (which I reviewed here) and learn all about it.  In her trademark upbeat style, Paine lays out the blueprint for a cash-only lifestyle.

Sep 052012
 

My husband and I are in the midst of an unofficial Three Month Cash-Only Challenge, in which we reluctantly forego credit cards and use actual, physical cash for all of our purchases.  If you’re curious as to why would go cash-only despite our love of credit card rewards, check out Part I, “The Accidental Players.”

Six weeks into our unofficial Cash-Only Challenge I got the opportunity to try out our new cash-only lifestyle while traveling.  On previous vacations we’ve always carried an absolute minimum of cash (maybe $20, to cover transportation tips and airplane food), and blithely charged all of our vacation expenses to our credit cards.  Of course, we then had to deal with the arrival of the credit card bill a month later, and even though our spending was usually “reasonable,” it was always a bit of a downer to have to cough up money for a vacation that was already over.

A cash-only system changes that- all the money has to be saved and allocated up front, so there’s no “hangover effect” of having to pay after the fun is over.  But regardless of whether the money is paid before or after the vacation, what I really wanted to know is whether going cash-only would result in less money spent overall.  The verdict?

Going “cash-only” on vacation saved us a lot of money

Why?  Because it forced us to set limits up front as to how much money we could spend. Rather than going into a vacation with a vague notion that we should only make “reasonable” purchases, a cash-only lifestyle required us to nail down our travel expenses ahead of time so that we could make sure we were carrying enough cash with us, and/or make sure there was enough money in the bank for a mid-trip ATM visit.  And by looking at those expenses ahead of time, we became a lot less inclined to fritter our money away on needless purchases.

Our vacation in this instance was an 8-day trip to Georgia and North Carolina to visit family.  Only my daughter and I went, as my husband wasn’t able to get time off work.  The tickets were already purchased before our Cash-Only Challenge started, and we were staying with relatives instead of at hotels, so in budgeting for the trip I only accounted for the following expenses:

Vacation Expenses

  • Transportation to/from airports: Prior to the Cash-Only Challenge, we would often take airporters to and from our departure and arrival cities, but that would have put us back $250, and I just wasn’t interested in parting with that much cash.  It’s one thing to charge it on a credit card and “forget about it,” it’s another thing to physically hold $250 in my hands and then part with it. I decided to drive us to the airport- I knew that gas would cost us $20 round-trip, plus $87 for long-term airport parking.  Once in Atlanta, we could take a public transit train for $2.50 to our final destination.  (BTW, it was an hour-long train ride and it seemed like we were the only tourists on the train, but I actually liked it- I felt like my daughter and I were seeing an authentic side of the big city.)  Savings = $138
  • Food (Breakfasts, Lunches, Dinners, Snacks):  We’ve always done the typical vacation thing: eat out 3 meals a day, attempting to find fairly low-cost options like coffee shops, delis and fast food joints.  But now that I had to budget up front, I was appalled at how much even that would cost.  So I packed  all of our breakfasts (saved $80), snacks (saved $20), and airplane food (saved $14). Then I budgeted a mere $2.50 per person for lunches and dinners, banking on the luxury of being able to cook our own food since we were staying with relatives.  I know that might sound a bit hard-core frugal tightwad-ish, but it actually was pretty painless- see this post for a rundown of what I packed for breakfast. Savings = $159
  • Presents for hosts:  We wanted to give our two gracious hosts (our cousin we stayed with in Atlanta and our aunt we stayed with in North Carolina) a little token of our appreciation for putting up with us.  I used to do $25 gift cards, but I realized that would put us past our available cash.  So I went to local artisan food shops before we left and spent $15 per gift for little samplers of artisan olive oil and balsamic vinegar from The True Olive Connection, gourmet tuna fish from Dave’s Albacore, and premium roasted nuts from Nut KreationsSavings = $20 (hopefully they don’t mind that I saved money on their gifts??)

The End Result- 65% Savings

So in total we spent $222, whereas we would have normally spent $646- that’s two-thirds less than before!  As we go through this Cash-Only Challenge it never ceases to fascinate me how holding actual, physical dollar bills in my hands causes me to be more conscientious about spending them.  it was a little nerve-wracking carrying over $200 in cash with me, and if I were traveling internationally I probably would make mid-trip ATM visits to avoid carrying that much money at any given time.  But overall, taking our cash-only experiment on vacation was well worth it, and I can hardly wait to try it again for our next vacation.  (Yes, I’ve gotten to that point where saving money is genuinely exciting to me- feel free to roll your eyes- I won’t hold it against you.)

Want more?  In Part I: The Accidental Players, I explain how we wound up in this Cash-Only Challenge despite having no interest in a cash-only lifestylePart II: Grocery Budget Jitters describes how we weaned ourselves from credit cards and took the plunge into using cash.  Part III: The Roller Coaster, tracks my logistical acrobatics (and occasional panicked moments) as I attempt to cover all of our month’s expenses before our cash runs out. In Part IV I report back on taking our Cash-Only Challenge on vacation with us.  Part V describes the cash-only budgeting method we used to keep our spending on track.

Interested in doing a Cash-Only Challenge yourself?  Check out Crystal Paine’s book, “The Money Saving Mom’s Budget” (which I reviewed here) and learn all about it.  In her trademark upbeat style, Paine lays out the blueprint for a cash-only lifestyle.

Jun 292012
 

My husband and I are in the midst of an unofficial Three Month Cash-Only Challenge, in which we reluctantly forego credit cards and use actual, physical cash for all of our purchases.  If you’re curious as to why would go cash-only despite our love of credit cards, check out Part I, “The Accidental Players.”

The Roller Coaster

Week 3 of the Cash-Only Challenge has been a bit up-and-down for us, so I’ll give you a day-by-day synopsis:

  • Monday: Mood: Calm.  After being a nervous wreck last week about whether we would overspend and run out of cash (see Part II: Grocery Budget Jitters), I had separated our spending money into envelopes- each month we’d withdraw $350 for groceries, $50 for household expenses (toilet paper, shampoo, etc), $100 for miscellaneous expenses.  With one week left in the month, we had $21  in our “household” cash envelope and $25 in the “grocery” envelope- everything was proceeding according to plan.
  • Tuesday: Mood: Gleeful.  By doing some coupon acrobatics, I spent $17 from the “household” envelope on a really good deal on all-natural sunscreens, which means we’ll be stocked up for the summer.  More coupon acrobatics ensued at the grocery store, where we spent $24 from the “groceries” envelope and bought enough food for the rest of the month (with $1 left).  I’m embarrassed to say that I felt positively flushed with endorphins- we were going to survive our first cash-only month without running out of money.
  • Wednesday: Mood: Confused.  Realized that if we withdraw $350 for grocery expenses every month, how are we supposed to account for the occasional online food purchase, like the $20 in agave nectar we were going to order next month?  Do I deposit $20 back into our account to cover the online purchase?  But wait, I can’t do that, because we bank with Charles Schwab and ING, which don’t have branches to make cash deposits.  Now I’ll have to create some kind of accounting system where we set aside cash for the online purchase, and deduct a corresponding amount from our usual $350 cash withdrawal the following month… what a headache!
  • Thursday: Mood: Happy.  I discovered a surprising benefit to using cash: you end up with lots of spare change.  After so many years of using credit cards, I had literally forgotten about all those coins you end up with when you use cash.  Every time we returned from a store we emptied any coins into a jar: after 3 weeks we’ve got about $4 of change in there.  That’s $4 we would have spent unconsciously when using a credit card, but instead it’s sitting on our desk, patiently accumulating.
  • Friday: Mood: Panicked.  The weather is beautiful today, so we decided to go to the beach this afternoon, build a bonfire, and barbecue dinner at the beach.  Except with $1 left in the grocery envelope, we can’t go buy our usual bonfire food (hot dogs, hot dog buns, chips, salsa, marshmallows, graham crackers, chocolate bar).  And we can’t call off the bonfire- our daughter is too excited about it, and besides, it would be super lame to announce that we didn’t have a beach bonfire because we ran out of money.  Hence, I discovered a new phenomenon: Panic-Induced Creativity.  No hot dogs? No problem- we’ve got two-year-old teriyaki meatballs in our freezer that we can cook kebab style.  They needed to be eaten anyway.  No hot dog buns? No problem- we’ve got garlic naan (flatbread) from Trader Joe’s- a light toasting over the fire is all it will need.  No chips and salsa?  That just adds extra calories anyway- I’ll pack celery sticks to snack on.  No marshmallows, graham crackers, or chocolate bars for making s’mores?  Uh oh- major problem here.  I took a deep breath and broke the news to our 5-year-old daughter- no s’mores tonight.

She didn’t miss a beat, “We’ve got marshmallows in the pantry!”

“But those are mini marshmallows, and there are only 5 left.  And there’s no graham crackers or chocolate.  It won’t work.” I explained patiently.

“Yes, it WILL work, there are only three of us,” my daughter said happily, looking at me like I was missing the obvious.  “And, I don’t like the chocolate and graham cracker part anyway.”  I pictured us threading mini marshmallows (each about a centimeter around) onto little wooden kebab sticks, and then eating them- each one was less than a bite. My daughter was looking up at me, smiling.

I smiled back, and put the baggie of 5 little white marshmallows into our beach bag.

Want more?  In Part I: The Accidental Players, I explain how we wound up in this Cash-Only Challenge despite having no interest in a cash-only lifestylePart II: Grocery Budget Jitters describes how we weaned ourselves from credit cards and took the plunge into using cash.  Part III: The Roller Coaster, tracks my logistical acrobatics (and occasional panicked moments) as I attempt to cover all of our month’s expenses before our cash runs out. In Part IV I report back on taking our Cash-Only Challenge on vacation with us.  Part V describes the cash-only budgeting method we used to keep our spending on track.

Interested in doing a Cash-Only Challenge yourself?  Check out Crystal Paine’s book, “The Money Saving Mom’s Budget” (which I reviewed here) and learn all about it.  In her trademark upbeat style, Paine lays out the blueprint for a cash-only lifestyle.

Jun 212012
 

bag of groceries

My husband and I have officially begun our unofficial Three Month Cash-Only Challenge, which means that we reluctantly weaned ourselves of our credit and debit cards and start using actual, physical cash to make our purchases.  If you curious as to why would go cash-only despite our long-standing affection for credit card rewards, check out Part I, “The Accidental Players.”

As you can imagine, the weaning process was easier said than done- credit and debit cards have become such an integral part of our financial lives that it’s a task in itself just to track down all of the auto-pay bills that are linked to our credit and debit cards.  It turned out there were eight bills we needed to take care of: the water bill, garbage bill, gym membership, cell phone bill, Tivo bill, newspaper subscription, auto insurance bill, and the internet bill.  It took me about 30 minutes total to log into each billing account online and switch the auto-pay information over to our checking account. (Ok, I admit that I didn’t change the billing information on  the Tivo bill- it’s not due for 7 months, and I just couldn’t commit myself to the cash-only challenge for that long.)

Bills like the gym membership, newspaper subscription, etc. are the same amount each month, so it didn’t freak me out too much to switch them to our checking account- I had already budgeted for those, and the payments wouldn’t go up unexpectedly.  But nonetheless as I went through the process of switching the bills to our checking account I felt a bit sick to my stomach, because I was bringing us closer and closer to the point where we’d actually have to dive in and start this Cash-Only Challenge.  It’s the fluctuating payments that scare me in a cash-only lifestyle-  what happens if I need $500 for groceries one month but I only have $350 to use? I reassured myself that my Quicken financial software shows that we average $350 in grocery spending, so there’s no reason why I’ll run out of money for groceries if I allot $350 in cash each month.  But the $350 is an average- what about those months when we have lots of parties and barbeques to attend and we spend more money on food to bring to the parties?

I sort of cheated in handling that very situation this week- we had a party to go to and we brought 2 packages of sausage, a large salad, and two loaves of garlic bread- about $20 worth of food (we would normally spend less than $6 to feed the three of us for dinner).  Rather than go to the store and spend the extra $14, I raided our pantry, freezer and fridge and was able to come up with everything except the garlic bread, which was only $5.  So, in one way it was a success, because we actually spent a dollar less than we normally would on dinner, but I still call it cheating because presumably at some point we’ll have to replace what we used, which means we’ll have to come up with the other $14.

In an ideal world, I’d save the extra cash left over on months when we spend less than $350 on groceries, and use it for unexpected grocery expenses like party food.  But my fear is that I’ll unwittingly spend the extra money on everyday food, and then not have enough left when the extra money is needed.  And that right there is the beauty of the Cash-Only Challenge- it puts your budget and your discipline to the test- either you stick to your budget or you are out of luck- there is no money left to spend.   That’s why embarking on this challenge feels like standing on edge of the cliff and diving off- we have to hope that our budgeting skills are as good as we think they are, or else we won’t fly.

Do you cash or credit to pay for groceries?  How do you stay within budget despite the extra costs of barbeques and summer parties?

Want more?  In Part I: The Accidental Players, I explain how we wound up in this Cash-Only Challenge despite having no interest in a cash-only lifestylePart II: Grocery Budget Jitters describes how we weaned ourselves from credit cards and took the plunge into using cash.  Part III: The Roller Coaster, tracks my logistical acrobatics (and occasional panicked moments) as I attempt to cover all of our month’s expenses before our cash runs out. In Part IV I report back on taking our Cash-Only Challenge on vacation with us.  Part V describes the cash-only budgeting method we used to keep our spending on track.

Interested in doing a Cash-Only Challenge yourself?  Check out Crystal Paine’s book, “The Money Saving Mom’s Budget” (which I reviewed here) and learn all about it.  In her trademark upbeat style, Paine lays out the blueprint for a cash-only lifestyle.

 

Jun 142012
 

My husband and I are finding ourselves accidental players in an unofficial game called the Three Month Cash-Only Challenge.  This challenge was devised by money-saving expert Crystal Paine in her upbeat personal finance book, The Money Saving Mom’s Budget (reviewed here).  She challenged readers to do away with credit AND debit cards for 3 months, paying for all purchases with actual, physical CASH.  Paine maintains that a cash-only lifestyle is second-to-none in requiring people to make the hard budgeting and spending decisions that are necessary to balance their budgets, and ultimately, to start saving their money for things that are truly important to them instead of frittering it away on miscellaneous purchases. (Incidentally, she does allow a few exceptions where debit cards can be used- when the purchase is online, or to pay a recurring bill like the electric bill, garbage bill, etc.)

But as much as my husband and I are committed to improving our financial situation, we were uninterested in participating in the challenge ourselves- we use credit cards to pay for virtually everything, but we always pay off our balances in full every month.

We don’t have a credit card problem- we paid off our credit card debt, I said to my husband. 

“And if we stopped using credit cards, we wouldn’t get credit card rewards anymore, my husband pointed out.  (And that is the trump card right there- I am addicted to credit card rewards- we earn $25-$50/month in free gift cards, and most of the time it is my only way to get a shopping fix. What would I do without my shopping fix??)

“If we pay off our credit card purchases in full every month, then it’s really no different than using cash, right?

And so, we concluded that the Cash-Only Challenge was unnecessary for responsible people like us.

Then, why do we find ourselves unwilling participants in the challenge right now?  Well… because we want to refinance our home mortgage  to get a lower monthly payment.  And in order to have the best chance of success with that, our credit reports need to show $0 in credit card debt.  The tricky thing about credit reports is that credit card companies report current purchases as debt, even if you plan to pay off the purchases that month.  And it can take 1-2 months for your credit report to reflect that you’ve paid off your credit cards in full.  So, in order to make our refinance application airtight, we need to show $0 balance on all 3 of the credit cards we use for at least 2 months.  And since we have to be credit card-free for two months, we figured, why not make it three months and put Crystal Paine’s Three Month Cash-Only Challenge to the test?

Those of you who already operate on a cash-only basis are probably rolling your eyes right now, wondering what the big deal is.  But the reality for me is that I have been using debit and credit cards almost exclusively for 15 years, and honestly, the thought of going cash-only makes me nervous.  Will I run out of grocery money mid-month?  Will my husband and I be miserable having to limit our purchases to cash-on-hand?  Will I feel deprived when I don’t have credit card reward gift cards to use as spending money?  Will it make us crazy to drive to an ATM every time we want to make an unexpected purchase?

I’ll be writing all about our experiences in this series, and the ultimate goal is to answer this: Will being a “cash-only” household change our family for the better?  Or will the inconvenience of using cash, and the benefits of credit card rewards, persuade us to return to credit cards as soon as the three months are over?

Want more?  In Part I: The Accidental Players, I explain how we wound up in this Cash-Only Challenge despite having no interest in a cash-only lifestylePart II: Grocery Budget Jitters describes how we weaned ourselves from credit cards and took the plunge into using cash.  Part III: The Roller Coaster, tracks my logistical acrobatics (and occasional panicked moments) as I attempt to cover all of our month’s expenses before our cash runs out. In Part IV I report back on taking our Cash-Only Challenge on vacation with us.  Part V describes the cash-only budgeting method we used to keep our spending on track.

Interested in doing a Cash-Only Challenge yourself?  Check out Crystal Paine’s book, “The Money Saving Mom’s Budget” (which I reviewed here) and learn all about it.  In her trademark upbeat style, Paine lays out the blueprint for a cash-only lifestyle.