When I was married, I hated managing and living on a budget. It was my duty and I did it but I dreaded it.
And now that I’m divorced, guess what? I still hate managing and living on a budget.
A few years ago, I read the Dave Ramsay plan for budgeting. He is a big advocate of cash and it made a lot of sense. But trying to convince my husband to go along with the Ramsay concept was an exercise in futility. It was just one more thing to argue about so I gave up.
After our split, the ball was in my court. It was time to set up my Single Mom Budget and figure out how I was going to manage my money. No one to argue with this time around. It took me a bit but I love the way it’s turned out.
Here’s how I set it up:
1. Develop a Budget
First, I set up a realistic budget. It took me awhile to figure out what I was spending and what my new life expenses were but I’ve got it down now. I started off with listing the necessities, like housing, utilities, food, auto insurance, and medical insurance. Then I went for the fun stuff: entertainment, travel, eating out, clothes… I even set aside money for hair, massage, and facials (these were a key component to healing after a year of vigorous chemo treatments). Of course, I couldn’t leave out kids’ activities, like soccer, tutoring, and sewing classes.
But developing my budget was (almost) the easy part.
Once my budget was complete, staying on track was the challenge. So, I remembered the Dave Ramsay “cash” plan and gave it a try. To do so, I went through each line item and decided what would be spent with my debit card, auto withdrawals, and checks. The rest of my budget became all cash.
2. Withdraw (and Spend) Cash
I love cash! I am probably one of the very few people out there who pays cash for almost all of my daily purchases- from gas to groceries to clothes to paying for my daughter’s sewing classes to restaurants. Usually, I have a few hundred dollars in my purse in cash. Who does that? Me! And I highly recommend it. Seriously, cash helps me monitor exactly what I’m spending and what I have left because I can see it with my very own eyes. Each time I get paid, I go to the bank and withdraw enough cash for the month to pay for everything except the few items that I already determined would be paid via check, debit or auto pay (see above).
Next, I took out several envelopes and wrote down each line item from my budget and the amount I budgeted for that item and put the proper amount of cash in that envelope. For example, I have envelopes for groceries, gas, spending/misc, spa, hair, kids’ activities, travel, medications, and more. Each time I need money, I go to my dresser drawer, find the correct envelope, and pull out money. When the cash is gone from an envelope, I’m done spending. If I have extra money in an envelope at the end of the month, I put it in my “savings” envelope. Most months, I have cash left over and it’s a great incentive for me to watch my spending. It’s amazing how much money I was spending on stupid stuff—like a coffee or muffin. It added up really fast and I put a stop to that. Back when I used my debit card for just about everything, it almost seemed like “funny money.” Cash is all too real to me. When I see it, I am far less likely to fritter it away.
3. Use Credit Cards Sparingly (A Necessary Evil)
I use no credit cards at all unless I’m purchasing a plane ticket, I’m out of the country, or I’m buying something online. And when I do use a credit card to make those purchases, I pay it off immediately, usually before the bill arrives in my email inbox. If I forget to get cash out of my envelopes and I must use my debit card, I head to the bank a day or two later and deposit the cash back into my account. I am a stickler for staying on budget and I don’t allow myself to cheat. I am proud to say that I have yet to add one penny in debt since leaving my husband. It hasn’t always been easy but I am committed to living within my means. Of course, there are reasons to charge items. Attorneys, unexpected medical expenses, car troubles… Life happens and who knows when I’ll need that help. But I refuse to go into debt for anything frivolous. If I can’t pay for it in cash, then it just doesn’t happen.
4. Use Debit Cards With Caution
I use debit cards very sparingly. It gets too hard for me to track my spending so I prefer to use it only when I forget to take out cash from my envelopes.
While going cash is sometimes inconvenient – like when it’s snowing outside and I must walk into station to put cash on the pump – it makes adhering to my budget so much easier. No longer do I need to use a debit card to pay for a coffee. When my daughters need a few dollars for a field trip, I don’t need to scramble to find cash. I’ve decided that, overall, cash rocks.
5. Have a Slush Fund
Beyond saving for a rainy day, make sure you have some cash and some cushion in your checking/debit account in case you go over your budget. Unexpected expenses come up so it's important not to budget so close that if you estimate a little off, you're find yourself in a pickle.
Because I pay for most items in cash, I now save all my change. I purchased a very cute piggybank for my bedroom and empty my change into it. Right now it is so full that I’m not sure I can add another penny in there. When I get some time, I’ll take it into the bank and turn it into dollars. I’m guessing there might be a few hundred dollars that I “accidentally” saved. I think I’ll take it on my next vacation (that I paid for in cash) and treat myself to something extra special.