Two Different Approaches to Cash Budgeting

When it comes to budgeting, using a cash system is one of the easiest ways to stay on track. You don’t have to worry about tracking every penny . You simply allot certain amounts of cash toward certain budget categories. There are a couple different ways you can go about cash budgeting; the envelope system or the daily cash budget.


The Envelope System

The cash envelope system is the most popular for cash budgeting.You simply figure up your normal expenses  and put that amount of money in an envelope marked for that budget area.

First you need to figure out which areas to fund. Possible budget categories may be groceries, gas, clothing, eating out, and “blow” money. Once you have your categories in mind, research what you normally spend  by looking at bank or credit card statements and old receipts.

Once you have done your research you will then have a good idea of how much money you should be funding toward each of your budget categories.

The last step is to mark an envelope for each budget category and insert the specified amount of money you have chosen.

You can fund your envelopes on a monthly, weekly, or biweekly basis. This will depend on how much money you currently have to fund your categories and how often you get paid.

Just remember, you can only spend the money you have put in that envelope. Budget wisely because when it’s gone, it’s gone.


The Daily Cash Budget

The daily cash budget works well for people who work or are out and about often. To implement the daily cash budget you will first determine what your biggest cash expenses will be. This will most likely be groceries and transportation expenses.

To start out, set aside your grocery and gas/transportation expenses in a marked enveloped. Now, if you are like me and you buy lunches at work or school, or make stops at the vending machines, calculate how much you normally spend.

Got the amount calculated? Now think about how you could possibly lower the amount of money spent daily. Maybe instead of eating out everyday you could limit that to one or two times per week and bring your lunch the rest of the week. Instead of buying coffee in the morning you could bring your own from home. If you can think of a way to shave off a couple of dollars a day you’re on the right path.

Now that you have your daily amount, take only that amount of money with you when you leave the house. Leave your credit or debit cards at home, this way you have no choice but to be as resourceful as possible with the money you brought.

I’ve just started implementing the daily cash budget into my routine and I have already been able to cut $54.00 a week from my spending.

Cash budgets can have big advantages. You don’t have to track every dollar, because you’ve already decided where your money is going. It’s easy to stay on track when all you have to do is simply look to see how much cash you have left in your envelopes or wallet. With commitment and some tweaking you can make a cash budget work for you.

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