Debit cards are probably almost as detrimental to your financial health as credit cards can be. Between the convenience of swiping a card and the opportunity that exists to forget to record a transaction, you leave yourself open to plenty of problems. I’ve recently gotten back on a cash-only budget.

I’ve found that this particular method works extremely well. Some people refer to it as the “envelope system”. Basically, you get an envelope for each category and every week, you take out of the bank the cash that you’ll need for each category that week. (i.e. groceries, restaurants, personal care/toiletries, gas, entertainment, etc.) Then, you just use the cash. Don’t swipe the card anywhere. Write your checks for your bills or make your payments online. This keeps you from having a million transactions per month to track, it reduces the risk of forgetting a transaction, since you’re paying cash for everything, and most importantly, it forces you to be aware of your spending habits, to know how much cash you have and to make your money last longer.

I’ve found that the times when I manage my finances the best are the times when I use the cash-only method. In addition, I’ve found that this provides me a much better feeling about the money I spend. I feel better when I take $XX to the grocery store, buy this week’s groceries and still have money left over. I feel good about going out to dinner and a movie on Friday night because I’ve set the money aside for it. It’s right there in front of me, specifically earmarked for that purpose. It’s not hiding out in a checking account with my car payment and mortgage.

So, hey, what’s the harm in giving it a try once or twice? Try it out for a month or so and see what your results are.

This entry was posted on Thursday, February 2nd, 2006 at 2:25 pm and is filed under Budgets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.