Are you a swiper or casher? (Yes, I made those words up 🙂) There are many thoughts on the best way to keep your spending under control and stay on track with your budget.  Some say cash is king and others think the same thing can be achieved using your debit card.  It depends on your money habits and personality.  Ultimately discipline is the driving factor so in my opinion, either method or a combination of the two will work.  Before I share what method I use, let’s review each.

Cash Envelope Method

The cash envelope method requires you to fill up specific envelopes with a budgeted amount of cash each pay period.  Cash envelopes are not required for all of your budget items just the ones that tend to throw you off track with your budget like groceries, eating out and entertainment.  (These items may be different for you.)  The rule is that you only spend the money that is in that specific envelope without borrowing from another one.    

With this method you have to manage multiple envelopes and potentially have large amounts of cash lying around the house depending on your budget.

Debit Card Method

The debit card method requires you to use your debit card for all of your purchases.  It is the most convenient method; all you have to do is swipe and go.  Is convenience always the best thing though?

With this method it can be hard to manage your budget because all budget dollars are in the same account.  How do you know when you’ve spent your entire grocery budget?  Or your entertainment budget?  One way is to track your spending through an app or you can set up a separate account with a debit card that is specific for those budget items. 

Hybrid Method

The hybrid method is a combination of the cash envelope and debit card methods.  An example would be using the cash envelope for groceries and the debit card for gas.  If you choose this method it is still highly recommended to set up a separate flexible debit card that would just be for these types of expenses.

Which method do I use?  Until recently, I was a chronic swiper.  I almost never carried any cash.   (I know, I know not a good idea to not have any cash.)  What makes the debit card method work for me is the fact that I have a separate account set up for my flexible spending.  My flexible spending includes groceries because sometimes I may choose to eat out rather than cook.  Some of my other flexible spending choices includes choosing to go to the movies instead of getting a massage.   I like the flexibility of being able to allocate my dollars among several different line items but still stay within my overall flexible budget. 

Last month I switched to the cash envelope method for groceries.  Since I’ve never used the cash envelope method I wanted to see if I would notice a difference.  I will tell you that so far I find myself being more conscious when I am at the grocery store.  I will follow up in a couple of months to give my complete verdict.   

In the comments below, let me know which method you use?  What are some of your tips for staying on track?