Cash: The Experiment
March 8, 2011 13 Comments
I’ve been trying to follow Dave Ramsey’s suggestion of living a cash-only existence. By paying for my membership to Financial Peace University (FPU) I also received a lovely wallet that contains envelopes in it. I have 7 different labeled envelopes in my wallet:
- Pet Supplies
I have $820 a month that will eventually get put into each of these envelopes to pay for all non-bill expenses. But since I get paid twice a month and I don’t really want to pull out $400 at a time, I’ve decided to pull out money weekly, every Monday.
I made myself a “pay schedule” that tells me how much to pull out each Monday and which envelope to put the amount in to. I made it so that I was only putting $20s into each envelope so I didn’t have those confusing times of thinking “Well, I’ll put $40 in this envelope of $0 in that one but really there is $30 in that one and $10 in this one.” Just makes it easier to only put money in the envelope once during the month and make that amount be $20.
So I am giving myself for gas $40 the first week of the month and $20 for each addition. The reason that week 1 gets more is because I’m assuming that if it is a long month I’ll REALLY need to fill up by the time the new month arrives. I may change this to put the $40 on the back end so that it can cover two weeks if necessary. We’ll see how this month goes since March is a long month.
For pet food and supplies I am just giving myself $20 per week. So far I’ve used this money to buy cat food and dog treats. Because of the amount I had left in my envelope I bought a less expensive (but HUGE) box of dog treats for Jack at Costco. Seriously, there are enough treats in there for him to have some every day for a year.
Food I am giving myself $100 per week. Last week I only used $70 of this. Paying for food in cash hurts. I didn’t think it would. But seeing those $20 in my envelope slowly go away makes each purchase a conscious act. When I drove up to Starbucks I would say “If I go buy that latte I’ll have only $40 left for the next 3 days. Is that enough for the purchases I have coming up?
When I did a trial run of the envelopes for a week before March started it also made a difference. I had $8 left in my food envelope and BF and I were buying snacks for game. I grabbed the stuff I wanted. Then I calculated how much it would have costed. Old SS4BC would have just bought everything. New cash only SS4BC noted that the total purchase was more than $8, so I put one of my vitamin waters back. It wasn’t huge, but it was a realization that I was overspending when I put each purchase on plastic.
Clothes I’m only giving myself $20/month. Since I started this debt-free journey I have not spent much money on clothes. Mainly because I don’t feel like I deserve new clothes until I’m credit card debt free. I have more than enough clothes to get me through just about any situation. The $20/month is to save for new shoes because I tend to go through about a pair per year, and the pairs I like cost $70. The extra is for any other little clothing purchases I decide I want to make. I have none in mind at the time.
Entertainment I get $40/month. This past weekend BF, my sister and I went to see a play put on at my school. We had a great time, but I spent my $20 entertainment fund + $5 of my miscellaneous fund. It seems like the miscellaneous fund is just becoming a toilettries/overflow from other envelopes. We had a fantastic time at the show though. =)
I get $20/week ($100/month) for miscellaneous expenses. This is a “catch-all” for toiletries, gifts, electronics, etc. I’m curious to see how quickly this envelope grows or whether it shall be a highly used envelop like the food one.
The only main downfall I’ve found from using envelopes was how to pay for purchases at stores where I get things in more than one category. I’ve ended up simply buying things in two purchases. So for instance, when I was at Costco I did one purchase to buy dog treats and then a separate purchase to buy the almonds that I wanted as a snack food. The cashier’s didn’t mind and there was no one in line behind me, but I still felt a little weird separating my purchase out like that. But it helped keep my money straight in each envelope.
According to the Costco cashiers, people do stuff like that all the time so I shouldn’t worry about it.
BF and I have both noticed a different in my spending habits the past two weeks. Seeing the little differences that I’ve made has encouraged him to consider using a cash only system. He’s just not quite sure how he’ll do it. I mentioned to him that one way he might start is to keep using his debit card but use a program like Mint or Quicken to monitor his transactions. I’m not sure if Mint does this but I know that Quicken will let you designate how much of your money you want spent on certain items and then it will send you an email if you’re getting close.
That sort of budgetting might be easier for him now, but I’ll let him decide what he wants to do. For now I’m really happy with how the envelopes are going. I didn’t think I would like it and it feels a little weird at times paying for everything in cash, but I can already see that I’m saving money this way.
Another downfall though? Online shopping… a lot harder to do… which is probably a good thing!