Budget Basics:
Cash-Based Method

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If I asked you to open your wallet right now, would we find cash inside? Nowadays, most people would struggle to produce more than a few dollars out of their wallets. In fact, only 16% always carry cash. 

As financial technology continues to advance, more and more stores are streamlining payments without cash. At Sam’s Club, you can scan your app to check out. At Walmart, tap-to-pay is available at every register. Next thing we know, we will literally be adding items to our shopping carts and walking out of the store without even touching our wallets to pay. 

Although I am a fan of streamlined processes and financial innovation, good ol’ cash holds a treasure lot of hidden benefits. Mainly, when you shop with cash, you can see the amount you have to spend decrease in real time. This is helpful to stay on budget as studies show you are likely to spend more when you swipe a card versus when you use using cash. Those observations aside, sometimes my budget just needs a hard reset — and cash is the way that I do it. 

Let me (re)introduce you to cash-based budgeting. This method is the founding father of all budget methods. It strips away all transaction tracking and card jumbling to leave you with two items: your money and your budget. You can implement cash into any budgeting system you use. However, when I am using cash, I like to use specific envelopes to separate my monies into spending categories. For the envelope budgeting system, you divide up cash among envelopes and use the designated funds as your guide to that month’s spending. 

Follow these three simple steps to start your envelope budgeting system:

Step 1: Decide which categories to budget with cash

Typically, these cash-only categories include discretionary spending items like groceries, eating out, entertainment, etc. It’s okay to start with a few cash-only categories as you get the hang of this method. Once your categories are set, label your envelopes. 

Step 2: Determine envelope allocations

Set your budget amount for each envelope. This should be based on your past spending habits. Consider looking at your last three months of bank statements to gauge those spending habits. For example, what was the average amount you spent on groceries during that period? Budget an amount for your grocery envelope that is close to your average (or a little less if you are trying to decrease spending).

Step 3: Stuff your envelope, and stick to your budget!

Now that you have a set budget for each category, the last step is to withdraw the cash for the budget period and stuff your envelopes! Once your cash runs out, that’s it! No more spending in that category. If you run out of funds prematurely, consider taking funds from another envelope and transferring them to the low-balance envelope.


Let’s stuff our handmade cash envelopes! A cash based spending plan is a great way to watch your spending! #cashstuffingtok #HoneybeeBudgets #personalfinance #blogger #cashbudget ♬ Taste It – Ikson

See the envelope budgeting system in action in our TikTok!

Getting started with cash-based budgeting is as easy as 1-2-3! Keep reading to really set yourself up for success here.

Have a contingency plan

As noted earlier, with our card-dominated society, we can run into roadblocks with our cash budget. Depending on the store, a cash purchase may be unavailable or inconvenient. Other times, we might forget our cash envelopes or accidentally purchase through an app when we intended to use cash. For these instances, it’s best to have a backup plan. For example, my husband and I budget $125 for eating out each month. Instead of withdrawing the entire allotment and splitting it between our two envelopes, I withdraw $80. This leaves a $45 buffer in our account for instances above where we purchase through an app — which, let’s be real, happens frequently. Know your spending habits and anticipate roadblocks where you might need to adjust your cash budget. 

Cash Based Budget

The bottom line

The goal of cash-based budgeting is to ultimately reduce excess spending and monitor your spending habits. Whether you use it for a few heavy-spend categories or the majority of your line items, you’ll want to plan for unforeseen circumstances that might threaten your budget. Give cash-based budgeting a try, and watch how your spending habits change. If you get stuck and need a little help, ask your grandma. She is probably a pro at this budget method. 😉 

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DISCLAIMER: Although I do have experience in the personal finance field as an Accredited Financial Counselor® professional, I am not a registered financial planner, advisor, or investment agent. Budget Blueprints and any content or resources made available on this site is for informational and entertainment purposes only. I am sharing my personal experience which may not be applicable to others. I am not liable for any losses or damages related to actions or results related to the content in this website. If you need specific financial advice, consult with a licensed professional financial advisor/planner who specializes in your specific need area.