Creating and Sticking to a Budget: Do we really pay cash for EVERYTHING?

by Melody on March 1, 2012

One of the main components of Dave Ramsey’s Total Money Makeover (Amazon) is paying cash for everything.  While we do end up “paying cash” for everything in the end, how we get there depends on what we are paying for.

With every new year comes more and more folks trying to start their own budgeting revolution, which inevitably turns into the “Great Credit Card Debate”.  People have very strong feelings in all directions.  Some are against any kind of credit or debit card, some only use credit cards and never pay cash or there are the middle of the road folks like me.

I am a strong believer in the fact that what works FOR OUR FAMILY is to not use credit cards as a sole source of payment.  I think regardless of whether we pay the card off at the end of the month, we will overspend with a credit card.  It is so much easier to swipe a card than hand over cold hard cash.  To see an empty envelope or the food envelope with only $2 left makes the decision not to spend so much easier.  The promise of cash back or airline miles is not enough for us to take the risk.  Plus, I have a very hard time paying for things that we have already eaten or are already using.

That being said, I thought I would share how we do pay for everything.  One of the main questions I get from people who are trying to start budgeting or starting to follow Dave Ramsey’s plan is this:

“How do you pay for things without a debit or credit card?”

We don’t.

Here are some of our special circumstances:

Online Bill Pay

My husband gets paid every week, so in order for our budget to make sense to me I had to do a little adjusting.  We saved up one month’s expenses in the beginning and started from there.  We pulled out all the cash we needed to put in our envelopes for the coming month.  I had all of our additional bills (cable, cell phone, utilities) set to be due within about a week of each other at the beginning of each month.  I leave the amount needed for each bill in our checking account and had all the bills set to automatically pay out of our account.

Online Shopping

As I’ve mentioned before, I do quite a bit of online shopping.  I use our debit card to pay for everything I buy, but instantly pull the cash out of corresponding envelope.  For example, if I buy coffee from Amazon, I pull money out of the grocery envelope.  I keep a separate envelope in my purse for this purpose.  All the money I pull out to cover an online purchase goes into this envelope, then once a week or so I buzz through the bank drive-thru to deposit the money.


For quite some time, we paid for our gas purchases with cash.  Then we had two kids.  It took me about 3 times of dragging them both in the gas station to pay, accidentally paying too much and then dragging them BACK into the gas station to get my change before we decided to re-evaluate our system.    We decided to set aside a certain amount of money each month for gas purchases and use a credit card throughout the month.

We chose a higher value cash back card and use it solely for gas.  When I pay the bills at the beginning of each month, I pay off the credit card with the money we have set aside.  If there is extra, it goes into savings.  We re-evaluate our needs a few times per year.  For example, we generally need a little more during the spring and summer due to more traveling and more trips.

I do know that we could use our debit card for gas, but we just never wanted to take the chance of desperately needing gas and not knowing if there was enough in our account.  We manage our checking account pretty closely, so there is never a ton of extra.  This was a safe alternative for us, as long as we watch it closely.

We also use this credit card when we make large travel purchases (airline tickets, hotels) and instantly turn around and pay off the balance with money from our savings.

We researched several credit card options before choosing our Chase Freedom card.  They have a VERY flexible cash-back program and our online bill/payment options are really simple.

These options are what work for our family, in the stage of life that we are currently in.  This may not work for everyone, but I wanted to shed a little light on one of the main problems I have found people run into when they start this kind of budget.  I would love to hear what works for all of you, please share any tips and tricks you may have.

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{ 4 comments… read them below or add one }

Karrie March 2, 2012 at 9:19 am

Seriously Melody- I love you girl! This was just what I need to hear at just the right time. I am compiling my cash envelope systems and trying to figure out basically my whole system today. I love how honest and practical you are, I love how you smartly are doing your online bill pay. I have been using bill pay but had it set up to do bills every payday, which was a giant pain. Especially if I got busy and don’t get around to it till Mon-Tuesday. Thank you SO much, perfect timing for me!


Rachell Newman March 2, 2012 at 9:51 am

She is awesome at was she does! Thank you for sharing Mel!


Lora March 4, 2012 at 8:03 pm

Loved this! We do things very differently now than when we first started 3 years ago. We now only have envelopes for the areas we want to be sure to control our spending (groceries, clothing, miscellaneous, vacation, etc.) Everything else we use debit. We are not as awesome and conscientious as you so we do not have a credit card. You are in the WAY lower percentage of people who actually can be trusted with a credit card to do the right thing, every time. 🙂
Also – there has actually been research done on how a person’s brain reacts when they spend money (this is via Dave Ramsey). When people spend cash, the brain actually registers “pain”. When people spend with a plastic card (ANY kind) it doesn’t. This is why, or one of the reasons why, people spend more when they use cards. This is why Target has offered a Target “debit card” that comes straight out of your account…they can afford to give you the 10% discount for using the card because statistics show that you will always spend more. Interesting, eh?


Melody March 4, 2012 at 8:49 pm

Totally makes sense about Target. 🙂 My husband and I watched a documentary about credit cards and they were saying that the cc companies actually want those people in the lower income bracket who only make minimum payments. These people apparently are how they make their money. They don’t want people who actually pay their bill on time.

It definitely pains me to hand over cash. If there isn’t enough in an envelope and I even have to think about swapping from another, just the thought of keeping track of all that makes me think twice.


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