The “Paying Cash” Experience – 2 Months Later

by Debt Destroyer on November 25, 2008

cash-circleSome of you may remember that at the end of August I decided that starting in September, I would start paying cash for certain items (groceries, household stuff, & entertainment).

Obviously I hoped that this would lead to major savings.  Dave Ramsey professes that paying in cash will save around 12% or even more!  I was shooting for savings of around $100 per month.

I have to admit that it was a little weird paying for stuff using cash after so many years of putting everything on plastic.  Especially at the grocery store where the bill can easily be over $100.   But very quickly I started to have fun in those situations.  I think I surprise the clerk when I start flashing the AJs around (Andrew Jacksons).

As luck would have it, I’ve charted my expenses for 4 months (2 using credit cards, and 2 with paying cash).  So how about we see how things are going so far?

In July & August we spent on average:

  • $507.62 on groceries
  • $145.66 on household items
  • $67.06 on dinning out

For a total of $720.34.

In September & October we spent on average:

  • $481.92 on groceries
  • $133.18 on household items
  • $81.31 on dinning out

For a total of $696.41

Paying cash has been saving me $24 a month.

I know that $24 isn’t all that impressive, but at least I saved.

Actually I have a hunch that November’s grocery expenses will be much lower than previous months.  I think this for a couple of reasons:

  1. My daughter’s food allergies improved enough so we no longer have to avoid wheat & dairy.
  2. I hit some “sales” and stocked up on lunch items.  I don’t think I’ll have buy lunch until mid December :)

But there’s plenty of time left, so who knows what could happen.  It was mentioned in the comments of my last expense report , that I should try an envelope system to see real savings.

So that’s what I’m going to do.

Starting in December we’ll set aside $450 for groceries, $125 for Household stuff, & $75 for going out.  The last two amounts will be lowered in January to $115 & $60 (I’m giving us a little bit extra for the holidays).

If we can make the January amounts work, that would be $620 for those three categories which would be $100 less than what we spent on those same items in July & August.

And that would be great!

Come winter, we need to save money any place we can because as I alluded to way back when in my Nitty Gritty post, heating costs are a killer!  I keep meaning to sign up for the budget plan, but I never get around to it (I did fill out an online form requesting this, but that seemed to do nothing).

Enough of my ramblings…

Do any of you use an envelope system?  Does it work?  Was it hard to get used to?  Did you stick with it?

I’m looking forward to hearing some of your experiences.

Until next time,


{ 9 comments… read them below or add one }

The Happy Rock November 25, 2008 at 12:23 am

I really look forward to your personal experiences with the envelope system. Great job testing changes, I know the cash only spending was terrible for me. Without ever running the final number my results were similar. It saved us a little, but certainly not 12-18%.

Two questions on spending cash…Did it make you think about spending money and how much it is hurts in a different way?

Did you just always have enough cash or would you be at the grocery store with only 100 dollars and have to make it work?


A-Train Finance November 25, 2008 at 4:46 am

First of all, I know it’s late when I am actually stalled by the simple math problem that is your spam protection, lol. Very interesting post. How much of the savings do you think is psychological? Honestly, today I put a charge of $1.20 for a parking structure on my debit card. Using cards is just so convenient, maybe by only using cash it actually makes it physically more difficult and annoying to spend money thereby making us not want to do it? Hey, whatever it is, it might just work. Nice post.


Money Beagle November 25, 2008 at 1:10 pm

Very interesting post. I actually think that I started spending less when I went from paying cash to paying with most everything on my debit / credit card. Now, for things like groceries, I’ve always paid for those on my credit card because of the rewards. But in the past, I would get cash out every week to cover things like eating at restaurants, dry cleaning, clothing, shopping, etc. Now, I put all that on my debit card and I think I actually spend less. Why? Because when I spent cash, I wouldn’t keep track of every individual purchase. With paying on my debit card, I do, because I reconcile my balances almost every day. As long as you’re keeping track of every purchase, maybe that would make it ‘even’ and make it where cash spending would be less, but just something to keep in mind.


Helen November 25, 2008 at 1:36 pm

I started using Dave Ramsey’s system at the beginning of this year, so I’ve been able to see the effect after a year. The first 3 months were spent just trying to understand how much I was really spending in each category, so I used that time to adjust those numbers to my actual spending. Since the purpose was to know where my realistic limits were, I didn’t expect to see huge cash savings at that point.

However, once I had that under control, I started to gradually lower my budget limits (like you’re planning to do). And, as you correctly predicted, I started to see the cash savings that Dave talked about. Once I found I could comfortably live within my reduced limit, I would lower it just a bit more, but never to the point where I felt seriously deprived (or else I doubt I would have been able to stick to it).

For me, the envelope system worked great not because I was using cash per se (in that cash is more “painful” than credit), but because there was a clear limit to what I could spend. Once the cash is gone, that’s it. I can’t spend anymore. It is a stark and clear demonstration of what my budget limits are. As I open the envelope and see how much cash is left, mentally I begin to qualify my purchases and gauge what I really “need” and avoid impulse buys. That is the power of the envelope system, as I see it.


Debt Destroyer November 25, 2008 at 7:47 pm

Great comments everybody!

@The Happy Rock – So far I don’t think paying with cash changed my shopping habits at all. And we usually shop with lists, so I pretty much knew how much I’d need and so far I’ve always had enough. Although one trip to Target was delayed because I had to make a special ATM trip.

@ A-Train Finance – I’m not sure how much of the savings are psychological. Probably some of it is, but we’re only talking $24 :)

@ Money Beagle – I agree. I think the fact that I’m tracking my expenses helps keep them lower.


burning windmill November 26, 2008 at 12:47 pm

Ive tried using cash this last week instead of plastic – im not liking it, i get really worried in the supermarket that Ill get to the till and not have enough money! – im spending MUCH less!


Peter November 26, 2008 at 11:03 pm

We’ve been using a the envelope system for a short while now, and we have seen a tremendous savings. As was mentioned above, you have a set amount of money in the envelopes every 2 weeks/month and when that money is gone, it’s gone. No trips to the ATM, and no stopping by the bank to get more. I can honestly say it is saving us hundreds because it has forced us to set actual “limits” to our spending, and not go over. If we find that we NEED to spend more in a certain category, and we’re out of money – we just have to take it from another envelope – and make do with less in that category.

If you’re just taking debit/credit cards out of the picture and switching to cash without any sort of a real plan – I don’t think you’ll spend that much less. I think the key is to make a plan/budget, and stick to it. That’s where the real savings comes into it.


Peter @ Wealth Creation December 3, 2008 at 5:23 pm

My father is a huge advocate of the envelope system. He is also a neurotically organized person. (That’s just my opinion) I tend to schedule my life in a creative manner according to when inspiration strikes. It works for me. As a direct result, I believe that this so called “envelope system” will never work for me. It’s just too organized…

I do believe in paying in cash though. It doesn’t help that in the country I’m living in right now, credit cards are still considered “new fangeled” and “amazing” thus they are rarely accepted.

It’s far far to easy to just swipe a card and forget about it. When you actually fork over a wad of cash you get a very real sense of how much you are spending. I think you can’t truly appreciate how much money paying in cash saves you until a year or so when you look back and realize just how much money you didn’t spend that would have been easily lost if you used a credit card.

Keep up the good work!


Sandy January 18, 2009 at 10:30 pm

I liked using credit cards because of the 30 day float. but the problem was I was not holding myself accountable to a budget. Now that I only have a few dollars on me, once it;s gone, Im done spending.


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