A Budgeting Experiment: Is Cash Still King?


I’ve embarked on a little budgeting experiment, and my wife, Julie, thinks I might be a little bit crazy.

The Backstory

Until recently, our budget has had about 30 categories, which is pretty modest compared to a lot of you that have 70 or 80 (which I think might be a little bit crazy, but we’ll save that for another day). I’ve been doing this budgeting thing a long time and I was getting tired of recording all the transactions and reconciling, just the heavy lifting of managing the budget and kind of itching to switch things up.

Is Cash King?

Meanwhile, I’ve been thinking a lot about the psychological connection between cash and spending. What if you really do spend more with a credit card—and despite your best efforts, your budgeting, your credit-card points savvy, what if you still spend more? I guess you don’t know unless you try—and that’s what I’m going to do.

Budget Overhaul

So, I reworked our budget significantly. (I actually cloned it so that I could run them in tandem because I’m so afraid of what I’m about to do here.) But I tried to really pull back to the basics:

Savings. Retirement goes out the door before it even hits the budget, so I hit my savings goal. We’re good there.

Giving. Giving has always been important to us and stands as another non-negotiable.

Christmas. We have a lot of kids, so….

Travel. This is a priority for us. We like to be able to go on vacation, so I don’t want to lose sight of focused savings here.

New Car. This will probably happen in six or seven years, but it’s on our radar.

His And…

Hers. It has always been critical to sharing a budget for us, so I kept our separate spending money broken out as well.

Bills. I took all of the fixed bills and the larger Rule Two expenses (property taxes, insurance premiums, etc.) and put them in one, big category.

Online. This is where things start to get really crazy. This freaks me out a little bit, but I am so tired of wondering what the Amazon charge was for and having to look it up, and it’s hard to enter on your phone because sometimes Amazon splits up the order into separate shipments. It gets tedious. So everything we buy online (and we have six kids, so this is basically everything) is in one big category. We are totally guessing on this number. We’ve never thought about it like this and we had very little context.

Cash. The rest of the spending will happen with cash. I went to the bank and pulled out a pretty good chunk of cash, and I divided it between the two of us, and we’re just going to spend cash everywhere we would have normally used a card. I did tell Julie she could use the card at the gas station because it’s a pain to walk inside to pay with cash. But everything other than online purchases, bills, and our savings goals—everything else we’ll use cash.

My Hypothesis

We ended up with ten categories instead of 30. But the volume of transactions will just plummet because cash—the way I’m tracking it—will not be an account in YNAB.

I’ve budgeted that money—I think it was about a thousand bucks—and that will be the entire outflow. So the Cash category will be zero and we’ll just spend from that thousand dollars.

My hypothesis is that we will actually end up with more and more cash on hand as the months go by because we are spending less and less. If for no other reason because it will be more painful to spend the cash than to hand over a card. We’ll see what happens.

And if our online purchases get out of control, I might have to drill down that category a bit. But I think, for the most part, what I’m really interested in is removing some of the heavy-lifting of the budgeting, seeing how our spending is impacting by using cash, and focusing on hitting the big goals and letting the rest go a little bit.

This may very well go south. Todd, who runs our Education and Support teams, thinks I’m crazy. And he’s probably right. But I’m going to try it. I’ll take one for the team and let you know how it goes.