Cash is... Best for budgeting

calendar iconAug 25, 2020

Looking to cut costs? Save a few pennies? Or find out where you’re overspending? Start using cash!


The tangibility of cash means it is the best payment method to rely on when budgeting. Why? Because you can see and hold how much cash you have left after you have made a purchase. Following buying your weekly food shop, or those shoes that you just had to have, you can quickly count your cash to find out how much your food shop or impulse buys have taken out of your budget. With cashless payments, it’s not quite so easy.

Keeping accountable with cash

Sure, you can open your bank account to check how much money you have left. Sometimes it updates straight away, other times, it might not show until a few days later giving you a false sense of reality.

Cashless payments can also influence accidental overspending. Have you ever had one of those days when you’ve tapped and clicked and hit that little green button so many times that you open your bank account to find you spent a little bit too much? Or worse, you thought you were in the hundreds, only to find out you had less than five pounds, dollars or euros left to spend for the rest of the month? If you’ve ever stared at your bank balance wondering where all that money went, you’re not alone!

A 2017 marketing study by academics Rufina Gafeeza, Erik Hoelzl and Holger Roschk found that:

“Those who rely on contactless or digital payments are less able to recall how much they've spent because the brain does not process the concept of 'losing money' as well as it would when using cash.”

Despite its popularity, cashless transaction methods are often ditched when it comes to budgeting in favour of decade-old cash-based methods, like the envelope system.

The envelope system

While there are countless apps and online tools that can help you budget, the much-loved envelope system is a favourite amongst money gurus like Dave Ramsey and Martin Lewis. The budgeting system has four easy steps:

  1. Define your budget categories; i.e. food, bills, entertainment and so on
  2. Set a budget for each category every month
  3. Writethenameofeachcategoryonaseparateenvelopeandthenfillit
    with your set budget in cash
  4. Onlyspendwhatyouhaveputineachenvelopeforeachcategory, and
    save what you have left at the end of the month!

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Why does the envelope system work? Thanks to the tangibility of cash, you cannot overspend. You can’t be tempted and when it’s gone, it’s gone.

“Only take the cash you absolutely need with you and don't have a cash card with you to take extra out of the hole in the wall. That way, however tempted you are, you have to walk away in the end.”

While budgeting can feel daunting, remember feelings of dread and stress will soon be replaced with a sense of achievement and relief when you have spare cash at the end of the month.


Is cash safe to use as a budgeting tool right now?

If you want to use the envelope system but are worried about spending with cash at this point in time, you need not worry. Despite widespread fears, the World Health Organisation has clarified cash is safe to use after news outlets misquoted them.

As we prepare ourselves for, what the World Bank is calling, “the worst recession since World War II”, budgeting with cash could prevent any unnecessary overspending and better prepare ourselves for a long road ahead.

Cash is tangible is one of the key reasons why cash matters. To explore all the reasons why cash matters click here

Last Updated: Aug 26, 2020