Thursday, July 17, 2008

Back to the Basics Using Cash

I am a big Dave Ramsey fan and started using a cash only system. I was already doing a cash envelope system before I read his book, The Total Money Makeover, but I became more disciplined after reading. It's rare in today's world to find a financial book telling you to use cash only and no credit cards. After we dug our way out of debt, we swore off using credit cards forever. I was very happy that he felt the same way he did about them.

The main reason I like using cash is once it's gone in a certain envelope then we stop spending for the month. I do over budget in our food envelope for those great sales. On average we spend $250-300 a month in food. It was closer to $200-250 for a family of 3, but with costs on the rise then I upped our budget. I also had to increase our budget for gas. It was a $100 a month but not it's up to $150 so not terrible but not having debt does make it easier to swallow.

We have $1200 worth of expenses monthly which includes everything from food, gas, utilities, gifts, household items, insurance, clothes, gas, and spending money. We put about $1,000/mo in savings. We have different things we are saving for like newer car, repairs, vacation and remodeling for the house. I have it marked how much money is in each category.

The main concern I hear is what if I have an emergency? That is why you put 3-6 months of living expenses into a liquid account so you don't need a CC. I have a debit card linked to that account as well as checks so I don't have to walk around with thousands of dollars on me. That's the other concern I hear often. I might get robbed if I carry cash. I never walk around with lots of cash and most of the time have $5 or less on me. When I do plan to shop then I bring a certain amount with me and sometimes a little extra so I get take advantage of an unadvertised deal.