I am learning to live on cash. It's a big change for me. I've always figured I'd spend less if I didn't have cash in my hands, and that if I used my bank card I'd at least have a record of where the money evaporated to. I came to realize though that even if I had all those little pieces of paper telling me where I'd spent the money, I wasn't really any closer to managing my budget. Worse, because I wasn't actually handing over bills, it didn't feel like I was spending at all.
Money management has been a hard-earned skill for me, and I still have moments when I'm really bad at it. I've come to understand though that, rich or poor, we need to know where and how our money is being spent. The less of it we have, the more important this becomes. If $20 can make the difference between groceries or no groceries at the end of the month, you'd damned well better know where to find it!
So, after lots of reading and thinking and discussion, I decided to switch to a cash only budget for my variable expenses. Fixed expenses are still paid through the bank but stuff like clothing and food are paid in cash. If there's no cash left, then no shopping gets done.
There are two key components to our cash only system. The first is setting aside a set amount for each portion of our budget—food, clothing and gifts, entertainment (including crafts), transportation, household supplies, medication—in labeled envelopes. The second is writing down what we've spent in a budget book, as soon as we've spent it. We keep receipts in envelopes in the budget book and we file those envelopes and each month's receipts away at the end of the month in a labeled 9x12 envelope. The system has helped me to know where we're doing okay and what needs work. It's very helpful if I need to find a receipt and it's a blessing at tax time.
At first I re-used envelopes that I received in the mail for all of this cash management. I simply wrote what they were for on the outside and put them to work. I still re-use envelopes for filing receipts in my budget book, but I found that they often didn't last the month when used for our cash. Then I put the money in jars but my husband doesn't care for that system. His hands are too big to just reach in and pull the money from the jars, so he has to pour the money out onto the counter and then return it to the jar once he's taken what he needs.
I've been looking for some sort of re-useable money holder so I was very pleased to see this post by $5 Dinners. I have quite a bit of fabric in my scrap bin so I'm going to make some of these fabric envelopes this weekend. I thought you might like to know how to make them too. Here's the link: http://www.5dollardinners.com/2011/12/personal-finance-4.html
Happy crafting!
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Photo source: http://www.5dollardinners.com
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