The Cash Method

The cash method of saving is a straightforward approach to managing your finances, where you take out your monthly budget in cash and use only this money for all your expenses. This method helps curb unnecessary spending by making you more aware of how much you're spending and what you're spending it on. It's an excellent strategy for those looking to gain better control over their finances, especially if they struggle with overspending or find it challenging to stick to a budget.

 

The Benefits of the Cash Method

One of the most significant benefits of the cash method is the tangible connection it creates with your money. When you pay with cash, you physically see the money leaving your wallet, which can make you more conscious of your spending decisions. Unlike using a card, where transactions can feel abstract, cash payments can make you more deliberate about your purchases, reducing the likelihood of impulse buys.

Another advantage is that once the cash is gone, it's gone. There's no dipping into your savings or swiping a credit card to cover the difference. This limitation forces you to prioritise your spending and make sure you're using your money wisely.

The cash method is also beneficial for those with smaller incomes or people trying to save for specific goals. By restricting your spending to the cash you have, you're more likely to avoid debt and live within your means.

 

Who Can Benefit from the Cash Method?

The cash method can work well for anyone, but it's particularly effective for:

  • Individuals Who Struggle with Overspending: If you often find yourself swiping your card for unnecessary purchases, the cash method can help you cut back.
  • Those Living Paycheck to Paycheck: The cash method ensures that you don't spend more than you earn, helping you manage your finances more effectively.
  • People Saving for Specific Goals: Whether you're saving for a vacation, a new gadget, or just trying to build an emergency fund, the cash method can help you reach your goals faster by curbing excess spending.

 

Example of a Monthly Cash Budget

Let's consider an example of a realistic monthly budget for someone with a smaller monthly income of £1,500:

  • Rent: £700
  • Utilities: £150
  • Groceries: £200
  • Transportation: £100
  • Entertainment: £50
  • Miscellaneous: £100
  • Savings: £200

In this example, after covering the essentials, there's £100 left for savings and £150 for non-essential spending. By taking out the £800 for variable expenses (groceries, transportation, entertainment, miscellaneous) in cash at the beginning of the month, you can divide it into envelopes for each category. As you spend, you can physically see how much you have left, helping you stay within your budget.