Why We're Switching Back To The Cash Envelope System

I’ve mentioned before how using cash is the number one way to help you stick to a budget. The reason I know this fact is from experience. You see we started our debt story using cash for everything – groceries, eating out, gas, dog care and fun purchases. As we got more in a habit of spending wisely we started playing around with our cash system. We switched to using cash only for groceries, eating out and fun purchases. We figured we didn’t overspend on gas and for the dogs so we switched to using the debit card for those.

Then after awhile I started to get burnt out when it came to going to the bank each week, so we created a new flexible system that allowed us to use different bank accounts to segment our money. We used that system for over a year and it worked great. No issues and no overdrafts.

Once we had that down and had a solid foundation of a fully funded emergency account, savings account, and sinking funds we switched to using our credit card. The credit card was great because we could pay it off each month (yay no interest!) and use the reward points to pay for our Christmas. It was a win-win. And that system work great until…

It didn’t.

Back earlier this year I was cramming hard for the Certified Financial Planner(TM) exam and was fully focused on getting it behind me. I spent close to 30 hours a week studying on top of working, taking care of our family, managing a house and running my business. J is in school and his school program is very time consuming. So while he helped a lot with the family and house stuff, he couldn’t really help with my workload. So we just let our budget start slipping.

If we ran out of something instead of putting on the list for the next shopping trip, we would just go out and buy it. We spent too much on take out because it was just easier. All the things we knew not to do.

While our exhausted behavior didn’t throw us too off course, it did take a knock in our savings account (not the emergency, just a savings, luckily). So once I passed the test, balanced our checkbook, and updated our budget I knew we had to make a change. So we sat down during one of our money dates (really it was just after dinner and we’re going to call it a money date, because that’s life) we talked about our spending. We both realized we needed to make a change. Fast.

The fastest and easiest change we could make was switching back to the cash envelope system. No more credit card, no more debit card. However, we’re keeping things simple – like 2015 simple. We’ll be using cash for groceries and eating out and then our credit card for gas and dogs.

Why are we still using our credit card?

Well that’s a good question. We didn’t overspend on gas and for the dogs. Plus, it’s easier. When I’m by myself with our son the last thing I want to do is unhook him from his car seat to run inside to pre-pay and then come back out, hook him up (which now he doesn’t want to go back in) and then fill up. It’s easier to leave him in the car, swipe our card, fill up and then be on our way.

For the dogs, we have our card on account at a local place that carries the food we like so we can run in, grab a bag and they charge our card. We order their treats from Amazon and they are on the subscribe and save option – so we don’t overspend in that budget category either.

How often will you be getting cash?

We plan on going every two weeks just as we grocery shop. To help combat the overspending we did in February and March we’ve cut down our eating out budget to $0 for the next few months, too. So we’ll be eating at home most nights or heading to my parents’ house for family dinner once a week. I won’t need a bunch of cash at one time and I can have them keep it in the bigger bills, too. That was one of my biggest complaints with the cash system was having to tell the teller X number of $50s, X number of $20s, X number of $5s and so on. Since we do most of our shopping at Aldi and Walmart we’ll be able to keep the cash easy to manage.

How long do you plan on doing it this way?

Long enough to get us back on track, but we might do it longer. I enjoy the ease of swiping a credit card and earning reward points to use on Christmas; however, I like being on budget more. So we’ll use the cash envelope system as long as it takes us to replenish what we took from our savings, which won’t be too long and then we might keep using it through the summer, too.

Do you consider yourself a failure for talking about flexible system and then switching back to cash envelope?

Absolutely not! Life happens and you have to be able to roll with the punches. We know that while J is in school we need to be extra careful with our spending. Even when he gets done with school we have big plans of buying land, building a home and funding our retirement. So if that means we have to switch our budgeting system to ensure we are successful than so be it!

It’s not failure when you realize your current method isn’t working and decide to shake things up to be a success. That’s smart. What’s failing is realizing it’s not working, but being too afraid to make a change.