One of the top complaints I hear about cash budgeting is that it’s harder to track spending with cash. When you’re swiping a debit card, it’s easy for to track spending electronically. When you’re spending cash, there’s a little more work involved.
I use Mint.com to set and track my budget. The idea of changing my system completely, or using the envelope method was exhausting. So I came up with a system for tracking my cash purchases electronically.
I still use Mint.com to track my spending. Mint allows you to split transactions. Before we were cash budgeting, we used the split transaction feature to categorize spending. If we bought dog food at Target along with other household purchases, we’d split the transaction so that the price of dog food was categorized with “Pet Expenses” while the rest of the purchase went under “Household Expenses.” Simple.
That feature makes it just as easy to split cash transactions. On Saturday, we withdraw our weekly cash allowance. We do our grocery shopping, pick up household purchases, and run errands for the week. I save all the receipts for purchases made with that cash.
Mint categorizes our ATM withdrawal as a single transaction. The following Saturday before grocery shopping, I split the ATM transaction based on the receipts I’ve saved.
To do this, just highlight the ATM transaction, click on “Edit Details,” and then “Split.” Enter the store and spending category. That amount will be categorized correctly in your budget. Cash we don’t spend remains categorized as “ATM Transaction.” If we spend it later, I go back to the original ATM transaction and categorize it correctly.
It reminds me a lot of something I watched my mother do every weekend when I was a kid: balancing a checkbook.
Electonic banking and money management software have made checkbook balancing obsolete. It’s possible to track purchases up-to-the-minute online, so most people are happy to be done with the hassle of checkbook balancing. But tracking spending manually makes me more accountable. It a little extra work, but it’s made me a lot more knowledgeable about where my money goes.
This system takes all the guesswork and stress out of budgeting for me. Instead of mentally adding things up in my head and checking my bank balance, I forget about budgeting until Saturday morning. I only take out the cash I can afford to spend, so there’s no danger of overspending. At the end of the week, I organize that week’s spending and start over again.
Have you ever lived on a cash budget? How do you stay organized and track spending?