It’s something we’ve all been told to do at one point or another—rely on all or mostly cash for our day to day expenses. The idea is that one will spend less money if they see a finite amount of it exchanged for goods and services. Spending might also decrease because there is only so much cash on hand, which means only so much can be spent.
This type of cash-only system can be difficult in a paperless society, but those who use it swear by its effectiveness. If you’ve decided to take Jason Hartman’s advice and put a little something extra away for your next investment, we’ve got a few tips, tricks, and warnings to get you there.
The easiest way to switch from plastic to paper is by using the envelope system. At the beginning of every month, go through the budget you’ve established and determine the exact amount of money needed to cover each category. Use a monthly average to begin, but expect to alter this as unforeseen circumstances arise.
Then, decide what currencies you’ll need. Maybe you want twenties for gas, ten for random spending, hundreds for groceries. Make a list, grab some envelopes, and head to the bank.
If you have self-control, this is a surefire way to save money. If you’ve allotted yourself a $30 budget for Starbucks and that $30 is gone—no more fancy coffee.
The keeper of the money has control over where all of it is spent—you’ll be able to see who in the family is spending and on what and be able to better balance your budget.
The envelope system is also easy to use, because there is no data entry. Everything is in a simple envelope and should be spent in that category.
Many people find that having a physical reminder of the money they’re spending makes them more accountable and less likely to overspend. The same goes for extra money left at the end of the month—it’s visually represented (at least until it is spent on treats or savings).
The envelope system may not work well for you if you’re forgetful. You’ll likely not be carrying every envelope with you at all times, so it is important to remember to grab the correct one. If you’re part of a big family, things can get particularly confusing and messy.
You’ll also have to remember to account for any debit card spending you do, either accidentally or otherwise. Keeping everything balanced may provide a challenge.
While most places accept cash, you should also know that some do not—be prepared. And get used to a few dirty looks in the grocery store from shoppers that don’t have the time to deal with cash.
A cash only envelope system can create a loss of money if you are unorganized. If you’re leaving your money in piles around the house, it can end up missing. If you forget to put your change back in the correct envelope, you’re off-balance again.
There will likely be an adjustment period (a month or two) in which you become accustomed to your new way of living—hang in there! After some time and a few adjustments specific to your unique living situation, you’ll be saving in no time!(photo credit: rynosoft via photopin cc)
The Young Wealth Team