19 August 2011

Cash for the Merchandise!

Dear Lissy,
I have a degree in Secondary Mathematics Education.  I grew up in the home of a CPA and financial counselor.  You would think that making and adhering to a budget would be as natural as breathing.  It isn't.  I have a fatal flaw in my brain wiring that doesn't allow me to comprehend electronic debits and credits.  If I'm not dealing in cold hard cash, I fall flat.
Here are a few basic principles for keeping on a cash budget.

  1. Have physical envelopes with physical cash for most budget categories including tithes & offering, food, clothing, and spending.  Save receipts in the same envelope.  When the cash is gone, you're done spending.  If you miss the deal of the century, you miss it.  I choose to keep a "household" envelope since I generally purchase groceries, personal care, and household items in the same store.  Don't make the mistake I did and just keep a general idea in your head of how much each category should take and then randomly spend on every budget category with a debit, or worse, credit card.  Trust me, the money runs out before the end of the month no matter how much you make!  You will quickly become overwhelmed with change.  Save it up for a family fun night, or just plain old long-term savings.
  2. Put any regularly recurring obligations (mortgage, utility bills, etc.) on auto-debit with your account.  Keep a note in your tickler or calendar reminding you to check the balance before and after transaction dates.
  3. If you use a debit card for fuel purchases, keep and total receipts.  It's still best for me to prepay car fuel purchases with cash, despite the hassle.  We have never been in a position financially to pre-buy an entire season of our home heating fuel, either.  We tried a monthly payment system where they delivered fuel based on estimated usage, but I found that I prefer to just pay cash in advance.  The "end-of-season" bill was often double or triple the usual payment, and was difficult to pay.
  4. Pre-pay monthly towards quarterly/annual bills.  I used to save up a bit of money every month to go towards those pesky water and life insurance bills that seem to come out of the blue and decimate my budget.  Problem is, we're living on a tight enough budget that if an emergency arose, I would raid that account for the emergency, leaving us short for the bills (Bad, bad girl!  See #5).  Several of the bills I was able to change to monthly auto-debits for a small fee.  The others I send an unsolicited payment that equals the monthly amount that will come due, and they send me a receipt.  For items like camp fees, Christmas gifts, and school books, I keep envelopes that get monthly deposits of cash.  For clothing and haircuts, I have one monthly envelope, but it will be spent on different people each month.  
  5. Keep an emergency fund of at least 1/3 of your monthly budget, and build it up to six months of living expenses as soon as possible.  Thing about emergencies is that you may not know what what or when, but they are inevitable. Some people apparently believe they live in a happy shiny world powered by jellybeans where their jobs, tires, sewer pipes, and people last forever.  In order for money to come out of our emergency fund, the need has to pass a simple test:  Could life continue normally if we didn't replace/repair this item?  New shoes for your cousin's wedding?  Not exactly life and death.  Having a broken arm set?  Probably better take care of that ASAP.  Some items, like car repairs, need to have a regularly budgeted envelope, but may have major work that needs to be done that warrants raiding the emergency fund.
Discipline = Freedom  

God hardwired that law into the universe.  It's true for money, time, diet & exercise,schoolwork, and a dozen other areas.  If you discipline yourself to set up a cash system, you'll have the freedom to spend whatever is in that envelope on the thing you need or want.  If you prefer to keep a running total of electronic cash, you buy the same freedom.  BUT,  if you freely spend with credit (or debit) for even a month, you'll often end up in bondage with late bills and creditors.

We are commanded to be good stewards of the money God places into our care.  Like Daddy, you may prefer and use electronic money almost exclusively.  Cash isn't inherently "holier" than electronic debits and credits, just easier to manage.  I find that most of my budget spending (clothes, gifts, food, entertainment, etc.) can vary widely depending on my level of diligence and discipline, and I need the physical safety of cash.  Ultimately it all comes down to I Cor. 10:31 - "Whether therefore ye eat, or drink, or whatsoever ye do, do all to the glory of God."

 You are of great value, Liebling!

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