Photo by sunshinecity

One of the ideas suggested for reducing debt and saving money is a cash budget. This means using a limited amount of cash to pay for most of your daily purchases instead of your credit card. Have you thought about making the change?

A cash budget might be for you if:

1. Cash feels harder to spend. Sometimes handing over crisp dollar bills makes you think twice about the amount.
2. You don’t pay the full credit card balance every month. If the balance on your credit card bill continues to go up instead of down, a cash budget could help keep a limit on it.
3. Using cash helps you plan purchases more carefully. No one wants to discover in the grocery checkout line that there’s not enough cash to cover the total. Knowing there’s a limit to what you can buy helps you prioritize purchases, instead of relying on the credit card to cover all of it.

You may not want to use a cash budget if:

1. Cash or card makes no difference. If it’s all the same money to you, the convenience of a credit or debit card can outweigh the tangible reminder of using cash.
2. Your card gives rewards or cash back. Incentives like these can significantly add up in a year, assuming the benefits are greater than any interest or fees.
3. The list of transactions on the statement is helpful. Seeing all the transactions on the monthly statement can be easier than trying to keep track of every cash purchase.

Do you use a cash budget, or primarily a credit or debit card? Or do you use a combination, such as the credit card for gas and then cash for other things? What works for you?

Rachel loves writing about ideas to simplify your home at Small Notebook. She lives in Texas and often eats ice cream for breakfast.