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If you are looking to pay off debt this year and get your spending under control, paying with cash is an excellent way to reach your goals.
Studies show we spend less when using cash. Paying with cash does something to our habits. It makes you more aware of how much you are actually spending. In our experience, cash is a wonderful motivator to spend less money!
When we were fighting to pay off all our debt, the first thing we did was use cash for groceries. We knew we needed to cut our food costs. We had no clue how to start.
We set a food budget and used only the cash we had in our envelope to purchase food for every pay period. Slowly we started using cash on other areas too.
Was it easy?
Did we reach our goals?
If you are struggling with spending, try using a cash envelope system. Getting started can be hard. We get it. New habits are hard to start but are usually worth it in the end.
We've got your back. We have 5 great tips to help you get started!
1. FIND A GREAT CASH ENVELOPE WALLET
Using a cash envelope system can be as simple as grabbing some white envelopes from your desk! Pinterest has some great DIY wallets you could make if you are crafty. Don't feel like you have to spend a ton of money. Do what works for you!
Our favorite wallet to use for cash is from A Time For Everything Shop. I love this store for so many reasons. It is a small business run by a husband and wife team. The quality of their wallets is fantastic. They are intentional about their product and pricing. They know most of their customers are getting out of debt or working on big financial goals. They keep their prices reasonable to help their customers reach their goals. I love that!
The wallets are made of laminated cotton. You can pick out the fabric you want when you order. The fabric is water resistant. You can wipe them down and clean them up quickly!
My wallet has 6 plastic dividers for each spending category. The zipper is good quality and durable.
Check out A Time For Everything here and get yourself a pretty new wallet. They also have products for kids too!
2. FIGURE OUT WHAT AREAS OF YOUR BUDGET YOU'LL SPEND IN CASH
Decide what areas of your budget you will spend in cash this pay period. Some areas are more practical to use cash than others.
If you are just starting out, we recommend you use cash for groceries, eating out, and Target runs.
Clothing is another great budget item to use cash. When we were paying off debt, I only used cash and shopped in stores for clothing. It took more time but I stayed in budget and purchased only what we needed.
These days, I do a lot of shopping on-line for clothing. For this season of life, it works for me. I use our debit card for clothing purchases now. My kids have a small practical capsule wardrobe.
I plan out clothing purchases throughout the year. I budget what we need to spend per season and try to keep our online purchases on budget.
If clothing is an area you consistently overspend in, we would urge you to try using cash. Shop sales in stores and buy used clothing. Especially if you have kids, gently worn clothing is a great way to save some serious money on clothes.
3. DIVIDE CASH BY BUDGET CATEGORIES
Once you decide what areas you will use cash, divide it by your budget categories. For example, you may want to use cash for food, date nights, target runs, and school activities.
Take your cash and divide it out into these 4 categories. Use the tabs in your envelope system to divide your cash by category.
4. HOW AND WHEN TO ADD CASH TO YOUR WALLET
Add cash to your envelope wallet at every pay period. We get paid monthly, so we have enough cash for the month. If you get paid weekly or bi-weekly, you can take out enough cash to get you through the next pay period.
If you have cash left over at the end of a pay period, AWESOME! You can roll that cash into the next pay period.
If you run out of cash, you may need to get creative about cutting your spending. Remember, the goal in using cash is to NOT use your cards when you run out. Cash forces you to spend less and budget your money. Try not to run out.
If you find you are consistently running out of money before your next paycheck, consider increasing the cash for that particular category. Or maybe you need to get creative and spend less money? There are many ways to cut costs. Learn a new skill or ask for help!
Remember, it is not worth it to frustrate yourself or beat yourself up if you overspend. Every family is different. Recognize you will go through seasons. Some seasons your spending will be high in one particular category. Don't' give up. This is a natural part of life, especially when you are raising kids.
Do your best to lower your spending as much as you can. This money stuff is a marathon not a sprint.
5. THE ONE QUESTION EVERYONE ASKS ME......
When it comes to using a cash envelope system, the one question everyone asks me is this:
AREN'T YOU WORRIED SOMEONE WILL STEAL YOUR CASH?
It's a legitimate concern.
I try not to carry tons of cash with me. I always have a small amount of cash in my wallet for last minute stops or needs.
We plan most of our grocery runs in advance. I only take what we need when I go to the store. This works for me.
In general, be smart. Practice basic safety.
If you are really concerned about carrying cash, pull cash out weekly instead of monthly. I think this takes more time, but if it works for you - DO IT!
Using cash is an excellent way to cut your spending to reach your financial goals. Find a cash envelope wallet you love or make your own! Figure out what areas you need to cut spending, get some cash, and get started! You'll be amazed at how quickly you can get on track with this one simple trick!