cash budget

february recap

month recap

Welcome to March! Waa-waa – there is still massive amounts of snow here and no sign of spring at all. I’m ready for spring. But since spring isn’t here I guess I’ll just stay inside and review our budget and progress in February. Yes!

February House Payments

We were able to pay $2,718.96 towards our mortgage this month. That means we were able to pay a little more than $1900 extra towards our mortgage! Thanks for working so hard Husband! Our payment coupons have a little box to check that indicates if you want the extra to go towards principle. I’ve heard at some banks if you don’t tell them specifically to put the extra towards your mortgage they will make advanced payments and it spreads your interest out longer. This chunk of change moved us to where our principle balance would be in June 2016 if we just paid it at the regular pace. Comparing the regular amortization schedule to the accelerated amortization schedule really helps me see the progress we are making and keeps me motivated.


We came closer with our cash budget in February.

Budget Actual Percent
Groceries $400.00 $  360.00 90%
Eating Out $124.00 $  124.00 100%
Home Improvement $50.00 $     60.00 120%
Pet Care $50.00 $     50.00 100%
Car Maintenance $40.00 $            – 0%
Entertainment $5.00 $       5.00 100%
Gifts $50.00 $            – 0%
General house $30.00 $     30.00 100%
Personal – Andee $70.00 $     52.00 74%
$819.00 $  681.00 83%

Our grocery was much more reasonable than in January. I had 5 people over for dinner one night and we still managed to come in under $400. I don’t think we’ll reduce this category any further for now because it can fluctuate so much depending on what we have going on.

We went over in home improvement because an exterior motion sensor light broke and needed to be replaced.

Our dogs spent all their money on bones and food. We buy their food at Costco because we have heard several veterinaries recommend it and it is reasonably priced.

Car Maintenance and gifts weren’t used and are rolled over continually to build a pot to pull from when we have larger expense. Like when we have several birthdays in a month. We did celebrate one birthday this month but we bought the gift with a left over gift card from Christmas. It was like finding bonus money.

We spent all of our general house money – paper towels, soap that kind of thing. Very exciting stuff in this category.

Personal money. I literally have no idea what I did with my personal money this month. I can’t remember a thing. I bought some candles when I was having a group of girls over for dinner – it didn’t seem reasonable to take it out of general house money because candles are definitely not a staple, for me they are a luxury – as absurd as that probably sounds. I bought Collin a new phone charger for Valentine’s Day so that’s where some of the money went. I struggle with the personal money category because the nerd part of me wants to track every penny I spend, even this category but the other part of me believes firmly that personal money should be used for fun and whatever I want. It’s the one category without guidelines or specifications so why should I track it? Because it really bothers me that I don’t know where I spent it! That’s why! (Hope you enjoyed that trip into my mind.)

So our cash envelopes did their job in February, we stayed on track for the most part and managed to live within the boundaries of one income.



eye rolling

I thought it would be fun to play a game where we pretend I told some people about our plan to pay off our mortgage as fast as we possibly can and then share their maybe real, maybe fictitious responses and then how I responded to these suggestions in my head.

Suggestion from my Doctor:  (rolling her eyes) “Why don’t you just split the difference and pay it down really fast for 2 years and then pay it at regular speed for whatever is left?”

Response: We don’t want work really hard for 2 years and then drag the remainder of our debt around for another 16 years – that’s how long this plan would last.

Suggestion from an employer:  “You could just pay it like a 15 year mortgage and it would be done in 15 years. Then it wouldn’t be so hard”

Response: Yeah but then it would last for 15 years instead of less than 4. Why would we extend the very thing we are trying to get out from under? If we have to choose between living on a tight budget for less than 4 years or living on a medium-tight budget for 15 years I will always choose tighter, more uncomfortable for a shorter amount of time.

Suggestion from a family member:  “I don’t think that’s a good idea. You wouldn’t be able to write off the interest on your home loan if you paid it off”.

Response: We pay almost $10,000 a year in house payments if we pay the regular amount. We are not saving $10,000 a year in taxes by deducting the interest from our home loan. I don’t care who gets my money, either the bank gets tons of it or the IRS gets some of it. I want to keep more of it. Also paying our mortgage off early will save us over $72,000 in interest over the life of the loan. We’ll be ok without the tax write off.

Suggestion from another family member:  (laughing and scoffing) “Then what? Are you going to quit your job and go on government assistance after you pay off your mortgage?”

Response: What!?! That response says more about you than it does us. We don’t only have jobs because of our house payment. We work because it brings value to our lives, allows us to contribute to society, reach other goals and enjoy life. If the only meaning work had was paying our mortgage I’m pretty sure we wouldn’t have bought a house, that’s too much pressure on a job. This response was hurtful to both of us until we were able to accept that it actually had very little to do with us.

Fun right? Those were all real responses to our plan; none of them were made up. And these are only some of the verbal responses; I get a lot of eye-rolling. But I don’t care. It’s not anyone else’s plan – it’s our plan. We came up with it, and we will own it. Nobody else has to do it, so I just try to ignore the comments. But the closer the commenter is to us the harder it is to ignore them. Sometimes I have to remind myself that with most people the comment isn’t usually about me but more about the person saying it.

cash budgeting part 2

I covered the mechanics of how I actually started the cash system in my last post. This time I want to show you how we divide up our money and make decisions.

I feel like our real life budget numbers are going to be the most useful in this post so please be gentle. This is a synopsis of where we planned to spend our cash in January and how we actually did. Our cash envelopes are broken down into nine categories:

Budget  Actual Percent
Groceries $500.00 $390.00 78%
Eating Out $124.00 $145.00 117%
Home Improvement $150.00 $150.00 100%
Pet Care $50.00 $32.00 64%
Car Maintenance $40.00 0 0%
Entertainment $50.00 $75.00 150%
Gifts $50.00 0 0%
General house $30.00 $28.00 93%
Personal – Andee $70.00 $60.00 86%
TOTALS $1,064.00 $880.00 83%

We budgeted a total of $1064.00 and spent a total of $880 so even though we came in over budget on two categories we still only spent 83% of our cash allotments! That is pretty exciting and encouraging. Some categories likes Car Maintenance, Gifts and Dog Money will just continue to grow each month to pay for things that will cost more than one month’s total. A trip to the vet would obviously cost more than $50 and the left over each month will just keep accumulating so we have enough to pay the vet in cash – ideally. The car maintenance and gift categories work the same way.

Now let’s talk about where we went over – entertainment and eating out, the two categories that took the biggest hit when we started using cash. We went over on eating by one meal and that was a special occasion where we took pizza to a family member’s house to watch a football game. It was at the very beginning of the month and we were still afraid of how things would work. Excuses, excuses I know. Don’t make our mistakes! The entertainment category will fix itself this month because we only get $5 instead of $50 to balance it out, plus we still have a $20 left from January so essentially our entertainment in February is half of what it was in January because we spent too much. There was a play we both wanted to see and my husband surprised me by buying tickets, he is very sweet and thoughtful – and the play only ran in January. So it was worth it to have less in February, plus February is a short month so we won’t need to spend as much anyway! Right? I feel like I just spent way too much trying to justify that whole thing to you.

The category I am most proud of is groceries. I assumed when we cut our eating out budget we would buy more food and I expected that to be around $500; I planned big because I would rather start with too much money in this category than too little and have to take it from something else. But I obviously way over budgeted; which is awesome!

Changes as a result of spending:

After looking at how we did in January I felt comfortable reducing our food budget by $100. Our home improvement budget was also reduced by $100 for February because it wasn’t until half way through January that we decided to live on one income so we had to make more cuts and home improvement seems the easiest place to cut.

Personal Money

This category encompasses a lot. My husband prefers to have his personal money via debit card because he likes to spend some of his personal money via iTunes. He was a separate bank account at our same bank and I transfer his personal the same day I divvy up the cash envelopes. Remember when I didn’t buy the fox canister at Target ***LINK TO TARGET POST****?! I’m still excited to have such a tangible example of how cash makes a difference in my spending patterns.

Here’s a breakdown of what I spent my January personal money on

New black tights ($5 @ Target),

$5 to a homeless man (I don’t usually give money direct to the homeless buy I really like I was supposed to)

Diet Coke ($1)

New Shirt ($3.99 @ Goodwill)

Latte ($4)

Lunch with Mom ($18)

Lunch w/ Mom and Sister ($7)

Dinner Date w/ Husband ($15)

That leaves $1 I have no idea what I did with. Remembering everything I spent my personal money was tough. I need to write a separate post about how much I love the “personal money” category!

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cash budgeting part 1

On Tuesday I talked about a very tangible outcome of switching to using cash instead of debit cards. Now I want to talk about how I actually set up the system of cash envelopes. I had wanted to switch to a cash budget system for quite a while. While we were saving $20K last year our budget system consisted of, “put $1700 or more a month in savings and spend the rest on whatever we need/really want”. It was a savings budget, not a real way of managing our money. It was a small practice step for us. Living on one income made it necessary for us to have an actual, legitimate budget to make our money go as far as it can.

The task of moving our spending from easily swiped debit cards to cash was daunting in theory but much easier in practice. I thought about it for months and read about it and researched it – but in the end the only thing I could do was try. It was complicated at first. It involved setting up a new bank account as our primary bank is USAA and they don’t have local branches. (As a side note we absolutely love USAA, they have the best customer service I’ve ever experienced.) We couldn’t take the money for the cash system out of an ATM because we needed it in exact denominations. It didn’t make sense to take the money out of the ATM and then go to a local bank and try to change the bills into something else. So we had to open a local checking account. I spent a lot of time trying to figure out how to get around this step so if you already bank locally you are way ahead of where I started!

I figure out the amount of cash we will need for the month prior to the month starting. I get paid weekly and by figuring it out before the month starts we are always planning ahead, not just keeping up. So the last two pay periods of a month are really going to pay for the first half of the next month, and the first two pay periods are going to pay for the second half of the month. In months where I get 5 checks instead of 4 we’ll use that extra money towards our house payment. So once I know how much cash we need for a month I divide that number by 4 and that’s the amount of my direct deposit into the local bank. When I figure out how much cash we need for a month I also figure out what denomination of bills we will need. Then the 1st and 15th of the month I go to the local bank and clean out the account. The local bank is basically acting like a revolving account. It is a little weird to go to the bank and say, “I need to withdraw everything in my account and I want it in these denominations”. Then I hand them a little piece of paper that looks like this.

note for bank teller

I think it is easier to give them the piece of paper instead of reading it all out to them. Yes I do feel like a crazy person asking for this weird amount of money divided out this specific way; but I figure if it helps us pay off our house and makes our lives better I can put up with bank teller thinking I’m a wack-a-doo. Then I take all the money home and put it into separate envelopes labeled for their specific purpose. We keep it in a little plastic file folder so when we go to the store or something we can just grab it out of there.

The fear of it being overwhelming complicated was way worse than it is in reality. It is something that you just have to get in there and do for yourself; and it won’t be pretty the first time but your confidence will grow and soon it’ll be a piece of cake.

On Tuesday I’ll go over the categories of our budget and how we decide the amounts for each category.

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cash: winning the Target war

This is an example of one significant way cash budgeting has changed my behavior in the short month and a half we have done it.

I love Target. I love shopping at Target. I love casually strolling down the aisles and looking at all the bright colors and the beautiful patterns. I love the home section, and the clothes section, and the accessories section, and the candle section, and the food section, and the kitchen section. Plus they have those red stickers poking out from the shelves alerting you to “good deals” down an aisle you never intended to visit.

You can probably guess why this is a problem. In our old budgeting system, which was spends money and see where it went afterwards I had a category called “general house stuff”. We don’t like to get too fancy in naming our budget categories. On average over 2013 this category was $55 a month. You might be saying “$55 a month on general house stuff, I don’t even know what that means!” Yeah, me neither and I spent the money and categorized it. I like to think it has happened to us all, we go to Target to get plastic sandwich bags and a birthday card and boom we leave having spent $60. How does Target do this? It is like magical retail drunkenness. You walk in sober, by the time you get to the birthday card section you’ve also seen a candle you want, and you need a new hair thing, and nail polish, and that rug is exactly what you’ve been looking for! Bam! You sober up at home with all your regrettable purchases.

After switching to a cash budget I realized exactly what I had been doing at Target. Target was a free-zone, when I went into that store I could convince myself I needed anything. Target doesn’t have exaggerated prices but offers an atmosphere is more inviting than some other commercial retailers. The environment created by Target makes you feel comfortable…until you get to the cash register. So I was going there and spending money without thinking and analyzing whether I really needed or even wanted the thing I was buying. When I would sit down at the end of the month to see where our money went I would look at the debit charges at Target and have no idea what I had purchased. I knew that I had intended to buy toilet paper, sandwich baggies, and a birthday card but what else did I but? I didn’t know so I categorized it as “general house” because 2 of the 3 things I had gone into buy were for general house use. After doing this for the length of our marriage (2.5 years) I had trained myself that anything bought at Target would just get buried as a house expense. I had basically trained myself to use a slush fund. I was cheating us.

fox canisters

these are way more adorable in person, the foxes are more foxy and less red panda bearish  in real life

This all came to an end when we switched to a cash budget in January 2014. We each get $70 a month in personal money, and there is also $30 a month for general house stuff, which is now defined as: paper towels, toilet paper, soap, tooth paste, shampoo and any of the other small stuff that sneaks into your grocery budget. There is no more room to fudge the “general house” budget. Last month $30 was the exact right amount of money for general house stuff. The other night I was at Target buying a few grocery items and I walked by the one of the kitchen utensil aisle and saw these little cuties:

Now I have eyeballing these cute little guys since before Thanksgiving. I just love how vintage they look. And the whole family of canisters with foxes would be so cute and fun! And they are on clearance now! So I waited long enough for them to go on clearance and now I should reward myself for all that waiting and buy them because I had REALLY wanted them for months! But what would I do with them? What could I store in them? They aren’t really big enough to store any food  in them? I already have cotton balls and q-tips stored in recycled candle jars. I could put my necklaces in them but then they would get all tangled. Did you see that?  That was the magic moment right there. The use of cash caused me to think beyond the reward of buying something I wanted to what I would actually use it for. I only have $70 a month to spend on whatever I want and it doesn’t really qualify under any other category of spending. If I had just been swiping my debit card I would have not even thought about it. But since I needed to choose a cash envelope to pay out of I had to think about how it would fit into my life after I left the store.

It was a really clear crystallized moment for me when I could feel the benefit of spending cash over just using our debit cards. Has anyone else accidentally lost copious amounts of money to Target? Tell me I’m not alone!

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