We are a cash only family.  We don’t have credit cards, and our only installment loan is to Sallie Mae.

BUT, sometimes the cash envelope system can be a drag.  It’s hard to get to the bank each pay day, then demand your money in small bills to be divided up into your electric envelope, your household envelope, your rent envelope, and so on.

Not to mention, you can’t pay your gas bill online with cash.  I can’t mail cash into Sallie Mae.  I can’t pay with dollar bills to renew my license plates or pay for car insurance.  So, if I was strictly on the envelope system, I’d have to go back to the bank and deposit the cash back into the bank, then write a check.

Annoying.  But sometimes physically seeing the money come in and go out is necessary, especially if you’re new to budgeting.

If you’re not so new to budgeting, but still need the limits imposed by using cash in hand only, I suggest getting two accounts: savings and spending.

Add up your monthly expenses, then divide by the number of times you get a paycheck per month.  Example: monthly expenses are $2000, you get paid weekly, you divide by four and get $500.

Deposit your most of your paycheck into savings and put only $500 in your checking account.  You won’t have access to the extra with your debit card, and you can’t write a check against it.  You’re forced to live by your cash budget amount unless you go to an ATM and withdraw against your savings account.

It’s the convenience of debit with the self imposed limits of cash only.  (I actually “pad” the checking account a little bit, so I am not always going down to the penny.)  I can’t spend more than our allotment of grocery money without making a conscious decision and performing a physical action (the ATM) to take it from our emergency fund/car fund.

Some people probably think this is unnecessarily complicated, but it’s tough to have the self discipline to stay within a strict guideline and never go over budget if the money is easily available in the checking account.  It’s easy to say we’ll go over “just this once”.  Especially when two people are doing the spending.

Our accounts are at the same bank, and I can quickly and easily move money back and forth between accounts using online banking.

Two accounts work for me!  For more tips, check out We Are THAT Family!