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I am all about the budget! AND, I’m all about getting the most freebies you can to make every dollar stretch further! I’ve written a bunch of posts on how I take advantage of credit card rewards, and like to use my credit cards for every purchase to get some sweet bonuses. And I always pay them off on time, and don’t pay a cent in interest. But having been a Dave Ramsey disciple, I always have the quote in the back of my head “people, on average, spend 12-18% more on credit cards than they do with cash.” And to keep our spending in check to make sure we’re not spending more than we should be, I like to give myself “the cash gut check.”
What Is It?
It’s really simple, actually. About every 6 months, Michelle and I switch back to using cash for a month. Now, most our bills are automated, so those stay on the cards. But, all of our discretionary spending (food, baby stuff, spending cash, etc) is spent with cash only. We (Michelle) use the cash envelope system to organize our cash by category, fill it up with our budgeted amount at the beginning of the month, and set off on our merry way. I pocket my $20 in spending cash (YES!) and Michelle rocks the rest in her little plastic cash/coupon organizer.
How Does It Work?
I’m glad you asked. Here’s how it works:
- Spend only the cash allotted for each category.
- See the video below. This pretty much sums up my entire blog. So I’m quitting now.
Did It Make a Difference?
I’m glad you asked, again. Seriously, you are a GREAT interviewer! We last switched over to cash a while back, and I want to report that it did NOT make much of a difference in our spending habits. Maybe it’s because we started our first year of marriage on the cash envelope system, or because I am super OCD when tracking our budget, but our spending fell right in line with our previous months and the months after it. Now, I’m not saying we came in under budget. We did go over on the food budget a little (as usual, until we upped it to a more realistic level based on our seasonal budget), but most everything else was business as usual.
Why Keep Doing It?
We are going to continue to do the “cash gut check” about every 6 months here at the iHB household. Just because we didn’t see a huge difference in spending doesn’t mean it was not valuable. I like the idea of setting a hard budget on something and trying to make decisions throughout the month that help you stick to that budget. I also like physically handling money to let me know it’s not just numbers on paper, but a physical commodity that I can save and spend. I guess I just like it to be tangible. Now, I know Michelle would rather not touch money because it’s absolutely filthy with germs and cocaine, but she also agrees that it’s nice to see the money disappear.
Plus, who knows, 6 months from now we might see that our spending habits have slipped and the cash gut check could be just what we needed. I suggest everyone give this a shot at least once a year, if not more. It can really help you gauge the accuracy of your budget, and give you a literal feel for the amount of discretionary money you are spending each month. It might shock some of you, and heck, you might even find ways to make your dollars stretch further as a result.
Comments: Have you ever done a cash gut check? Do you currently use cash only right now? Do you find that you spend more using cash or using credit cards?