Cash Budget

Remember cash, that green paper stuff? It still exists! And you can use it to make a cash budget.

In fact cash is still a viable form of payment in most stores.

I am going to outline a cash budget that can be used with actual cash or for those of you who are cash challenged an electronic form will be shown as well.

I am going to base my remarks on the fact that you probably don?t have a working budget. Most debt problems, at least in my opinion, begin because there is no budget.

When unplanned for items are purchased or emergencies occur, debt is used. Then without a family budget we just make the minimum monthly payment that comes from the credit card.

But a cash budget can be used not only to keep track of your money, but also to save and get out of debt.

The first time I used a cash budget was when my husband and I were in college. We would cash our paycheck instead of depositing it into a bank. Then we had envelopes for rent, food, gas, car payment, recreation, etc. We allocated each according to the needs of the month or semester.

I know a budgeting software, like Quiken, could have worked here instead, but while I am familiar with computers I have always had a problem finding budgeting software that I understand well.

That?s because they all seem too rigid to me. I feel like once I put in my numbers for my budget I am stuck. I need something more flexible.

I once read a book that some people are born organizers and some are not. I would definitely fall under the ?not? category. But even non-born organizers or non-born budgeters like me need to budget to reach my goals.

Anyway, we put actual cash in each envelope. And wrote on the outside of each the category and the total after each deduction or deposit.

dollars and cents layed out on a checkbook balance sheet

Each envelope was like a separate account. When necessary we could transfer money from one envelope into another, but only if we still had enough in the one we were borrowing from to pay bills.

For example if we wanted to go out to eat but our food and entertainment envelopes were empty we couldn?t borrow from the rent envelope, but maybe from utilities if we had already made that payment and had over budgeted.

This cash budget helped us keep track of where we were spending money. It was easy to see which envelopes fell short every month and which ones had too much.

Also we had an emergency fund envelope which could only be used for agreed on emergencies. And a get out of debt envelope which was emptied at the end of each month along with all other excess into a debt payment.

In our electronic world however this isn?t always convenient. Sometimes using a debit card it more reasonable. I admit I gave into peer pressure and traded my hard cash for a debit card. So I needed a digital way to work with my envelopes.

When you deposit your paycheck once or twice a month into your bank account it seems to vanish. Sometimes it is hard to keep track of where it all goes, which bills have and haven?t been paid, etc. It?s those little bills that throw me off.

Johnny?s little league uniforms, or Sara?s Piano Lessons. I am not very good about keeping it all in my head and I already told you budgeting software and I don?t get along. Separate accounts or ?envelopes? for each budget category work well for me.

There are actually personal accounting programs out there that work under this concept. But if you can?t afford one or don?t like those you can use a simple excel spreadsheet.

It could look something like this

Date Overall Balance Purchase Mortgage Utilites Car Payment Food Gas Entertainment
June 1 $1225 $450 $175 $250 $150 $150 $50
June 4 -$15.00 Movie Rental -$15.00
$1210 $450 $175 $250 $150 $150 $35
June 8 -$79 Groceries -$79
$1131 $450 $175 $250 $71 $150 $35
June 15 +$1225 Income +$450 +$175 +$250 +$150 +$150 +$50
$2356 $900 $350 $500 $221 $300 $85
June 17 -$900 Mortgage -$900
$1456 $0 $350 $500 $221 $300 $85
June 19 -$298 Utilities -$298
$1158 $0 $52 $500 $221 $300 $85
June 21 -$53 Gasoline -$53
$1105 $0 $52 $500 $221 $247 $85
June 25 -$426 Auto Payment -$426
$679 $0 $52 $74 $221 $247 $85


"A man in debt is so far a slave,"
Ralph Waldo Emerson.


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