Tuesday, June 27, 2006


As of July 1st, the R Family will be switching to a good old-fashioned envelope system for all our discretionary spending. Josh and I were brainstorming the best way to get ourselves acclimated to our new and improved, one-income budget. We did a bit of research and read in several places that the fastest way to cut 15-30% of all discretionary spending is to switch over to using cash.

The reason cash-only saves money is two-fold. Firstly, it hurts to spend cash. Slide the card, and it doesn't really feel like money is being spent ( A while ago, fastfood restaurants realized that people spend about 20% more on every single purchase when they are using plastic. So, what do you now find at every drive-thru and every register? ATM and credit card swipers!) But, when you have to pull out cash and hand it over in exchange for goods, you really analyze whether or not the goods you are getting are worth the cash you are giving. Secondly, using cash-only also forces you to stop spending once the cash is gone. If there are still 5 days left until the end of the month, but the dining-out envelope only has $1 in it, it doesn't take a rocket scientist to figure out that dinner at Olive Garden isn't an option.

Our current policy is to use our debit/credit cards for nearly every purchase. We always pay off the credit card at the end of the week (gotta love those online accounts with unlimited payment scheduling) . The advantage of this approach is that the bank and credit card companies automatically create a record of every purchase. That's less work for us. At the end of each week, I go over the activity for that week and categorize it in Quicken. We have utilized the records to help us get a good handle on where our money has been spent.

But, now that we have a baseline for all our different budgeting categories, we are switching over to cash-only. Our goal is to pay off our house as quickly as possible and in order to do that on one income, we are cutting our discretionary spending.

I am so thankful to have a husband that is such a good and careful steward of our money. I'm thankful that we have exactly the same approach to spending/saving/giving. It sure makes life easier!

I'll keep you updated. And, if you see me in the grocery store with a wallet full of envelopes, you'll know why!

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