I’ve always had an easy time making a budget that looks amazing on paper, but always fails time and again. Making a budget work in the real world is harder than it seems. This has been my story for years: high hopes, low results. I’ve had jobs where I’ve made very little and jobs where I’ve made a lot, yet I have never been able to manage my money easily, or well. So, after reading some writing by the highly respectable and wise Dave Ramsey, I developed a simple system that made sense to me based on some of his principles. I call it the Cash Budget. I now have a success story in managing and budgeting my money wisely, every week. I have had so many friends ask me about it that I’ve decided to put it into writing so that more people can benefit from it and become total millionaires…or at least not bounce rent checks.

Here are the lies I believed that were important to dispel:
-that you spend more money faster using cash than if you use cards
-that credit cards are for emergencies
-that cards are good for spending because you can budget, categorize, and track your spending easily online

So here is the famous Cash Budget:

1. Expenses: think through all your monthly fixed expenses and write them down or put into a simple spreadsheet.

fixed expenses are things like: rent, insurance, monthly donations, gym membership, credit card payment
fixed expenses are not: gas, groceries, entertainment and etc.
these expenses should be paid online linked to ur checking account or with checks, not cash, not credit cards

2. Math: Total all of those items. Subtract that figure from your monthly income.

Example:
$2000 (monthly income)
-$1500 (fixed expenses)
$500 (flexible expenses)

3. The Hard Truth: The amount that is remaining is ALL you have to spend on EVERYTHING ELSE. Do you hear me? EVERYTHING so if that’s not enough, you have to find a way to increase your monthly income or cut out a fixed expense.

4. The Magic: Take that amount (say $500) and divide by 4. That leaves you $125 per week to spend on all your “flexible spending”.

Flexible expenses are things like: shopping, gas, dining, entertainment, groceries, and miscellaneous.
If necessary you can categorize your flexible spending. ex. $125/week ($25 dining, $50 groceries, $25 misc, $25 gas).

5. Allowance: Now that you know your weekly allowance, you MUST get in the habit of taking this out in Cash every Friday.

Why Friday? Because you will always spend the most on the weekend and Monday morning you will realize that you need to find a way to make that $20 in your wallet last the whole week. Even if you think that it’s OK to get it on Saturday it is NOT, because you will go out Friday night, buy some stuff you don’t need and mentally try and keep track till you take your allowance out and it won’t work….I speak from experience.
Why cash? Because it is way too hard to keep track of your flexible spending if you use a card. Also you get better deals when bartering with cash, you avoid ATM fee’s, and credit card minimums at bars and other establishments.

6. Freeze your Credit Card: Stop using your Credit Card asap…literally don’t even carry it with you. Here’s a good tip: take your credit card and freeze it in a Tupperware container full of water. That way when you think you have to use it…you’ll have to wait. Oh and you don’t need a Credit Card to build good credit.

7. Emergency Fund: Try as hard as you can to add an expense line in Step 1 called “Emergency Savings.”

8. Be Tough: This is the last and maybe hardest step. This whole plan really does work, and certainly will help you to have more financial sanity. It worked for me and for my friends. But you need to be disciplined. Take out cash every Friday, don’t use your Debit or Credit Cards, stick to your budget and save that $1000. To paraphrase Dave Ramsey: “tell your money where to go instead of watching where it went.”