If you’ve been around here long, you know we are pretty big proponents of using cash to help maintain discipline in your finances. We use the good old-fashioned cash envelope system, and have since we got married. For some reason, many of you think using cash is strange because we live in a plastic society (interpret that in a few ways if you like), so Stacy even did a video about our actual cash envelopes back in March to try to help you see how we make it work.
But what about those of you who refuse to use cash? Maybe you’re scared of having more than a few bucks on hand because they’ll burn a hole in your pocket. Maybe you’re convinced you’ll be mugged if you bring out a $50 bill to pay for groceries. Whatever the reason, many of you haven’t bought into the idea of using cash envelopes for certain budget categories and want to know if there’s an alternative. Well…yes.
There is nothing wrong with using your debit card for budgeted expenses. I do this all the time. Unfortunately, this isn’t easier. In fact, I think it is harder…and worse, you have to do math – YIKES! But today I want to walk you through how you can instill discipline in your finances and stay on budget when you want to use your debit card instead of cash.
First, you don’t get a bye on doing a budget or using the envelope system. You still need to do a budget EVERY MONTH (imagine me giving you my serious, authoritarian look) and use envelopes for those budget categories where you struggle with overspending. For the Myers household, there are five such categories: groceries, gifts, entertainment, clothing, and misc. household (toilet paper, cleaners, etc.). You may have totally different categories and that’s just fine. The point is to use one envelope per category where you find yourself overspending every month.
The difference when using your debit card is that instead of putting cash in the envelopes and spending the cash until you run out of money or month, you’ll simply put a piece of paper in the envelope with an amount on top and keep record of your transactions. As you go to buy something from that category, pull out your debit card and the slip of paper from that envelope and immediately (do not leave the checkout counter until you do this) write how much you spent on the paper and subtract it from your balance in that envelope.
- Helps keep close watch on those categories where you usually struggle
- No cash on hand for those who are concerned about it
- Provides fraud purchase protection (when card is run as a credit instead of a debit)
- Requires additional discipline to keep track of the information
- You have to do the math instead of just counting remaining cash
- No cash in envelope = no money to spend; $0 on piece of paper won’t keep you from swiping the card
I’m still a fan of cash for those slippery categories and probably won’t be convinced to change anytime soon. However, hopefully those of you who don’t like the cash envelope idea now have a workable alternative. What do you think? Will this method change how you budget?