Cash is King, But it Ain't Clean


In a recent (fictitious) survey of 100 (imaginary) people, 52 reported being much thriftier with cash, while the other 48 (imaginary) respondents said cash flows through their hands as though they were a branch of the US government.

Okay, I made up the survey and its results, but I bet the comments on this post will validate my fiction. Some of us do great with cash because it’s tangible and feels more finite than debit or credit. Others need to avoid cash because spending it creates no electronic record – making it feel like “free” money (woohoo!).

Whether you’re a cash-hoarder or hater, one thing is sure: cash and YNAB make uneasy partners.

The YNAB Knowledge Base offers two ways to handle cash in YNAB:

1. Create a Budget Account called “Cash” or “Wallet,” and treat it as you would any other account: when you spend cash, you enter the transaction in the “Cash” account. When you make a withdrawal at the ATM, you enter a transfer in your “Checking” register which shows that the ATM withdrawal has changed the location of those dollars from “Checking” to “Cash” in YNAB.

2. Create a budget category called “Cash” or “Wallet.” When you withdraw money at the ATM, you enter the transaction in your Checking account register, categorize it as “Cash,” and you’re finished.

Personally, I’m not a fan of either approach. Not because they’re incorrect – I just think cash is problematic in general.

If you take the “Cash” account approach, it adds steps (hassle) to your budgeting process. If you take the category approach, it hides your cash spending in a “black box” category that reduces awareness of where your dollars are going.

Yeah, I’m anti-cash, so I’ll offer a third approach:*

Avoid it.

In the rare event you absolutely have to use cash, try handling it this way:

Withdraw the exact amount you need for the cash purchase, and categorize the withdrawal as the purchase.

For example:

Kate and I go out on a Saturday night, and we need to get cash for the babysitter on the way home. We stop at the ATM, withdraw the amount we need to pay her, and immediately categorize the withdrawal as Everyday Expenses: Entertainment with a payee of “Janey the Babysitter.”

No muss, no fuss, no messy “Cash” Budget Account, and no low-awareness “ATM” category in my budget.

*The “avoid cash” approach is just my opinion as a YNAB user. I’m curious to hear how others approach cash management in YNAB.