Paying Cash – How I Saved $200 This Month

This past month I changed up my system for paying bills.  Actually, I just changed a couple of things; instead of using my debit card for groceries and gas – I was paying cash.

I budgeted an amount for food and another for gas; then after the automatic deposit of my paycheck, I withdrew the cash for both amounts and put them in separate envelopes in my wallet at the beginning of the month.  I had heard good things about “the envelope system” and how it helped to control expenses.

I can’t use the envelope system for all my bills, but I figured I could make it work for at least these two items.

And did it ever!

At the end of the month there was $200 in my bank account that normally isn’t there at that time.  And it was so simple:

1. Look back over the past months to see what I’ve spent on each category
2. Use that as a guideline for my food and gas budget for this month
3. Withdraw those amounts from the bank account
4. Put them in separate envelopes
5. When buying groceries or gas, only use the money from the proper envelope

It helped me to take the amount and divide it by 4 to figure out how much I could spend per week and still stay on target.  For example, my gas budget was $200 for the month; that meant I would spend $50/week when I filled up the gas tank.  I tried to only fill up once per week, and group my errands as much as possible.  I live about 10 miles from the nearest town, so planning ahead and combining trips makes sense anyway.  Not only does it save time, it saves money.

Even though the envelope system works great, it’s not much fun in the beginning.  In order to stick to your budgeted amount, you need to be strict about purchases.  You need to ask yourself if the extras are necessary – is that stop at Burger King REALLY worth running short on groceries at the end of the month?  If you choose that Blizzard at Dairy Queen, will you still have enough for eggs, milk and bread in two weeks?

Which is where the “break it down to weekly amounts” strategy comes in handy.  And I wasn’t really hardcore about that; I used it as a guideline, and then kept that amount in my head when I did my weekly grocery shopping, etc.

Dave Ramsey says there is something different about paying cash versus using a credit/debit card.  Studies have shown there is a physiological reaction when we spend cash that isn’t there when we swipe out cards.  It’s harder to hand over our cash, so we tend to really think before  we buy when we are paying cash.  This works in your favor if your goal is to save money and spend less!

Maybe by paying cash for more expenses, you will end up spending less.  Try it out this month; choose a group of expenses for which you can pay cash, then set your monthly budget amount for that category.  Pay cash, and only the amount you have set aside.  See if you don’t wind up smiling at the end of the month with a sense of accomplishment from keeping your budget under control.