A cash budget just doesn’t work for me

by Karen on August 7, 2008

Since I started reading books and blogs about personal finance, there’s been one tactic that has jumped out at me that I don’t plan to ever use: the cash budget.

I understand that the point is to really pay attention to what you’re spending and to view money as a tangible, finite thing. It makes sense if you view cash that way. Unfortunately, my perspective on cash is much different.

For as long as I’ve been budgeting my money and paying my own bills (about 5 years now), I’ve used a debit card. In the beginning, I balanced a checkbook to track my purchases. Then online banking became so advanced that my purchases showed up on the site instantly.

I got into the habit of checking my online bank account balance daily. This is obviously risky if your balance is low (I almost overdrew my account a few times in college because I cut it so close). Now that I’m not living paycheck to paycheck, though, I always have a safe amount of money in my account. It’s just easier for me to use a debit card.

Now with sites like Mint, you can track your spending AND your budget. I used to watch my mom crunching the numbers and paining over receipts for hours every Saturday when she balanced her checkbook. The digital age has automated the process for us. Why not save some time and let my online banking and Mint do it for me?

Maybe I’m in the minority, but having cash doesn’t make me think harder about my purchases. Somehow after years of tracking my funds electronically, the way I view cash has been distorted.

I’ve come to think of the balance in my bank account at any given moment as the amount of “real” money to my name. Once it leaves my bank account and becomes cash in my hands, it’s no longer part of that bank balance, so I feel like I’ve spent it already. I’m more likely to spend it on something stupid.

On the other hand, when I swipe my debit card, I think of my bank balance – my “real money” – dwindling, and I’m more likely to think twice about my spending.

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Will joining a grocery co-op bust my food budget? « Living Well on Less
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{ 4 comments }

1 Ariel August 7, 2008 at 12:50 pm

I am so glad to know that I’m not the only one who feels that way. I’ve never known exactly how to describe it but you nailed it. Electronic banking works for me… I also like Yodlee and Mint. Yodlee is a little more… ‘technical’ but it does the same job.

2 Karen August 7, 2008 at 1:23 pm

Thanks for commenting, Ariel! I’m glad to know I’m not alone! In the past I’ve been mad at myself for the way that I think about cash, but now I embrace it. Whatever works, right?

3 Kacie August 7, 2008 at 1:52 pm

I can’t ever get into spending cash either. I just hate it! I don’t like keeping my receipts to remember how I spent the money. I don’t like how filthy it is.

I’m all about my debit card, and whenever I go somewhere that requires cash, I hate having to make a special trip to the bank or ATM or remembering to get cash back on a purchase.

Maybe it’s a generational thing (the aversion to cash) but I just like debit too much to switch.

4 Tiffanie @ welikemoney.com August 8, 2008 at 5:50 am

i’m the same way! i love my debit card and it’s rare when i ever have cash on me. i don’t use Mint, but i’ve used microsoft money since I turned 16 and started getting a somewhat regular income from my part time job. I live by it. :)

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