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A Case for Cash

I’ve heard financial planning experts talk about cutting up credit cards and telling people to use a cash based system to manage their finances. I’ve typically thought didn’t apply to me. I always paid off my balance every month and had an excellent credit score. Recently, I wanted to tighten down how much my family spends on various purchases. We’ve always used credit cards for every day purchases, but the credit card bill tended to fluctuate every month based on the families desires. I’ve tried various mechanisms for tracking. I’ve said that we’re only going to spend X dollars a day etc. It seems there was always some special 1 time event or purchase that ended up on the card.

The problem is that the mental accounting the family had to do to stay on track just wasn’t working. Instead we switched to a complete cash based system. Each family member was given an envelope with a certain amount of cash for everything. If my wife finds bargains at the grocery store she can have a little extra the next time she goes to the beauty salon. If she decides she has to have that certain something at the grocery store and doesn’t have enough money for the salon then she will just have to live with a few of the grey hairs a little longer before her next color treatment.

After using the system for a month it has worked well for us and allowed us to stay on budget.

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