Have you ever heard of the envelope method? Don’t worry – we got you covered! Join Josh and Austin as they detail everything you need to know about cash-based budgeting. Listen now to determine if this is right for you!
Main Talking Points
[1:46] – What is Cash-Based Budgeting?
[4:57] – How Does This Work?
[9:00] – Dad Joke of the Week
[9:50] – Cons of Cash-Based Budgeting
[12:22] – Pros of Cash-Based Budgeting
[16:04] – Is This Right For You?
[19:45] – Situational Approach
Links & Resources
047: Are Credit Cards Evil? – The Invested Dads
052: Understanding Your Credit Score – The Invested Dads
How To Switch To Cash Only For Your Budget – The Balance
Envelope Budgeting System- Investopedia
Social Media
Full Transcript
Intro:
Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey, hey, hey. Welcome back to The Invested Dads Podcast, the podcast where we take you on a journey to better your financial future. I’m Austin Wilson, Research Analyst at Hixon Zuercher Capital Management.
Josh Robb:
And I’m Josh Robb, Director of Financial Planning at Hixon Zuercher Capital Management. So Austin, how can people help us grow this podcast?
Austin Wilson:
Well, we would love it if you would subscribe. So actually, if you’re not subscribed, pause right now, push the button. Go push the plus button, subscribe. We would love if you would, and you will get every episode as it’s released every single Thursday, over 120 episodes, and we have not missed one yet.
Josh Robb:
That’s right.
Austin Wilson:
Every single Thursday. So go subscribe on whatever platform you are listening to us on, and we would really appreciate it if you’d leave us a review on Apple Podcast, Spotify.
Josh Robb:
Wherever.
Austin Wilson:
I don’t know, does Google have one?
Josh Robb:
I’m sure, yes.
Austin Wilson:
Let’s Google anyway.
Josh Robb:
Yeah.
Austin Wilson:
You would know that. But anyway, go leave us a review. We would love…
Josh Robb:
It’s just called Podcast, Google Podcast.
Austin Wilson:
Google Podcast.
Josh Robb:
It’s pretty simple, easy to find. You don’t have to have some weird word to it.
Austin Wilson:
We would love it if you would leave us a review. So, today we are going to be talking about a very specific and popular type of budgeting, and that is the cash-based budgeting method.
Josh Robb:
Yes. Also known as the “envelope method.”
Austin Wilson:
Envelope.
Josh Robb:
That’s what I said.
Austin Wilson:
No, you didn’t. You said on-
Josh Robb:
Envelope.
Austin Wilson:
… Like O-N, envelope.
Josh Robb:
Envelope.
Austin Wilson:
O-N-V-E-L-O-P-E.
Josh Robb:
So if you are writing in stationery, it’s an envelope. If you’re just putting a bill in there, it’s an envelope.
Austin Wilson:
It’s an envelope.
Josh Robb:
Yes.
Austin Wilson:
Dang it. We’ve had this debate before.
Josh Robb:
Yeah.
Austin Wilson:
So that’s how it’s pronounced. It’s envelope or envelope, depending on where you’re from.
Josh Robb:
Or cash-based, so you don’t have to argue it.
Austin Wilson:
Or cash-based budgeting.
[1:46] – What is Cash-Based Budgeting?
Josh Robb:
So the concept of that, high level, is cash-based system-
Austin Wilson:
I think it’s cash.
Josh Robb:
… uses cash.
Austin Wilson:
It uses cash.
Josh Robb:
Pretty straightforward.
Austin Wilson:
Yeah.
Josh Robb:
So the idea there is that instead of using a credit card or a debit card, or even a check, you’re using cash, physical cash.
Austin Wilson:
This is also known as the, “You get to touch everyone’s cash and get germs all over your hands and get sick method.”
Josh Robb:
Yes, it’s the “stay home, use your sick leave method.”
Austin Wilson:
Exactly.
Josh Robb:
But the main reason for this, is it really forces you into staying within your budgeted amounts.
Austin Wilson:
Yeah.
Josh Robb:
Because if I don’t have the cash in my hand, I can’t buy something.
Austin Wilson:
Right.
Josh Robb:
That’s the whole idea, right? So the envelope system…
Austin Wilson:
Envelope.
Josh Robb:
Is just the way of taking this cash-based and putting an order to it.
Austin Wilson:
Yeah.
Josh Robb:
Or organizing it.
Austin Wilson:
Now, one side note on cash…
Josh Robb:
Yes, yes.
Austin Wilson:
Is that I recently, I don’t have a lot of cash on me typically.
Josh Robb:
Don’t have a lot.
Austin Wilson:
It’s pretty unsanitary, exchanges hands a lot. And I…
Josh Robb:
You sort of rub it all over.
Austin Wilson:
I don’t get any credit card rewards if I use cash. So we’re going to talk about that later.
Josh Robb:
Yes.
Austin Wilson:
But anyway, so I recently sold something on Facebook marketplace, that worked. It was great.
Josh Robb:
It was great.
Austin Wilson:
I just didn’t have use for it, sold it, got a couple dollars cash for it. So I got a $50 bill for…
Josh Robb:
Yeah! There you go.
Austin Wilson:
Yeah. It’s nice right? So I go to the ATM…
Josh Robb:
Did you bring the little highlighter to make sure…
Austin Wilson:
To check it’s real? I did not. It looked so well-used that I assumed it was…
Josh Robb:
It was so old and crumply, and…
Austin Wilson:
So I got this $50 and I went to the ATM and that was, there was more than that. So I put all the money in, put it in the ATM to deposit it, because I like it where I can see it. So all of it, and this thing I put in 10 times and it keeps spitting it out…
Josh Robb:
It didn’t like it, it said, nope.
Austin Wilson:
Because the thing was so dirty.
Josh Robb:
Oh, gross.
Austin Wilson:
And like black stuff on it. It was filthy.
Josh Robb:
Yuck.
Austin Wilson:
Anyway, I took it to Kohl’s and used it at Kohl’s on a shirt.
Josh Robb:
And they didn’t touch it.
Austin Wilson:
And then made them touch it…
Josh Robb:
Oh, gross.
Austin Wilson:
And they took it, no problem. So anyway, that is not, that is just a tangent about how gross cash is, but let’s talk about, and just note in our heads that there actually are some expenses where you cannot use cash, such as loan payments, or insurance, and those really are not included in this cash business.
Josh Robb:
So like your mortgage, right.
Austin Wilson:
What if you walked up to the bank…
Josh Robb:
They want you to write a check or have it automatically, right?
Austin Wilson:
Could you just walk up to the bank? I’m sure you could.
Josh Robb:
Now, if your mortgage is at your local bank…
Austin Wilson:
Yeah.
Josh Robb:
And they haven’t sold it off somewhere else, then maybe you could deposit that money into an account. But I don’t know if they’d actually take it as the loan payment. They want it coming from an account.
Austin Wilson:
Right. So anyway…
Josh Robb:
Same as insurance, most of the time it’s, you don’t have… your local office is not the one that actually takes your money.
Austin Wilson:
Yeah.
Josh Robb:
You may have a local insurance agent, but they’re not over there taking your transactions.
Austin Wilson:
No.
Josh Robb:
There’s some expenses that you write-
Austin Wilson:
Let’s exclude those.
Josh Robb:
So that’s what you do in your budget though, is you say, okay, if I have a budget that’s $5,000 for the month and I have a thousand dollars mortgage, so take that out. I’m talking about my cash-based budgeting, and then I have insurance and let’s say all my insurance just because my math needs to be easy is another thousand dollars. So I went from five, now I’m at $3,000.
Austin Wilson:
So you have $3,000 cash you take out to build your budget.
Josh Robb:
Yep. And maybe some of the other ones are like utilities. A lot of times they don’t like you, some of them you can drop cash off and make a payment. But some of them may not be able to.
Austin Wilson:
Sounds like a headache.
Josh Robb:
Yeah. So the idea though, is all the ones like that I can eliminate from this system and have it automatically set to pay or do all that.
[4:57] – How Does This Work?
Austin Wilson:
So let’s break down how this works.
Josh Robb:
Yes. Yes. So first, I just did that. I said, okay, I had my $5,000 budget.
Austin Wilson:
Yeah.
Josh Robb:
I take out all the things, utilities, all the things that I can’t use cash for. And then what’s left is my cash-based budget piece.
Austin Wilson:
So in this case, $3,000 dollars.
Josh Robb:
So $3,000 dollars. So, then I would then say, okay, what categories in my budget am I going to use cash for? And how much are each of those? So now I need to get my cash. So, let’s say I get paid every two weeks on my payday or the day after, whenever your cash, or your paycheck is deposited and settled, I’d drive over or walk over to the bank and say, I need some money.
And on… side note, my wife and I used to do this. We were on a cash-based system. And so, I would go to the bank after payday and I would actually have a little sheet, a paper, and I would say, so that it all fit in my envelopes…
Austin Wilson:
Envelopes.
Josh Robb:
That I would have, I need, five $20 bills.
Austin Wilson:
Oh yeah. You had it broke down by bills.
Josh Robb:
I would need two $10 bills. You know, fives, tens, twenties, ones, whatever I needed to make each of my envelopes filled up.
Austin Wilson:
Envelopes.
Josh Robb:
Envelopes, envelopes. So you go to the bank, you get your money, get it in the denominations that you need, so that you are all set.
Austin Wilson:
It’s like Lutheran, Presbyterian…
Josh Robb:
Yes, whatever they are.
Austin Wilson:
Yep.
Josh Robb:
And so then I put them in my envelopes.
Austin Wilson:
Yep. Envelopes.
Josh Robb:
Envelopes. And that is all set for that time period until I get paid next. Yeah, all right. Now, depending on again, you’re taking out like the mortgages and those type of things. So it’s not like you need to split your paycheck between them, usually you’re just budgeting from one paycheck to the next in the cash system, all right. So I have all my money put aside in there, each in each spot. So each day my job is in the morning to say, what, what am I doing today? What is my plan?
Austin Wilson:
Right.
Josh Robb:
If I’m going to work, do I need any money between now? And when I get back home.
Austin Wilson:
Gas, lunch…
Josh Robb:
Gas, lunch, do I owe somebody money? Is there a March Madness pool…
Austin Wilson:
That you lost.
Josh Robb:
That I need to pay for that I lost and that I owe somebody money for that. And so only bring the cash that I need for that day, that will help me avoid overspending. So if I’m going clothing shopping, I should probably bring at least some of that money from the clothing envelope.
Austin Wilson:
I mean, the question is, it’s probably different for everyone.
Josh Robb:
Yes.
Austin Wilson:
But you really need to look at your spending in buckets.
Josh Robb:
Yes.
Austin Wilson:
And then have an envelope…
Josh Robb:
Envelope…
Austin Wilson:
Envelope. And for every bucket that you’re looking at.
Josh Robb:
Yes.
Austin Wilson:
So those could be like, you could have like a grocery envelope, a eating out envelope…
Josh Robb:
Yes. Gas.
Austin Wilson:
Clothing envelope, gas, those kind of things.
Josh Robb:
Yes. Yeah. And that’s the idea…and you know…
Austin Wilson:
And it’s different for everyone, right?
Josh Robb:
They actually make little, I want to call them like accordion folding organizers that are small enough that you could put, they’re just bigger than dollar bills. So, you could sort them and have each of them categorized and you could bring a chunk. So let’s say, and this is what a lot of people run into, part of… we’ll talk about pros and cons. But part of it would be like, well, I’m going to Walmart, I’m going to get some clothes and I’m getting groceries.
Austin Wilson:
Okay. Just grab little bit of both.
Josh Robb:
Right. And that’s the thing is, there may be times that come up where for whatever reason, maybe it’s a birthday month or something you’re spending more, you can take money from one of the envelope system to the other.
Austin Wilson:
Yeah.
Josh Robb:
But in general, you’re limited to that cash overall. So at the end of that period, you just have the cash that’s there.
Austin Wilson:
Yeah.
Josh Robb:
Or if at the end of the time period, you have leftover, you get to choose whatever you want to do with that.
Austin Wilson:
Party money…
Josh Robb:
You could fill up, put more in, you could say, oh, well I’m going to start putting extra in this category or whatever.
Austin Wilson:
Or save it.
Josh Robb:
Yeah.
Austin Wilson:
Invest it.
Josh Robb:
So that’s high level, how it works. Pretty straightforward. Pretty simple. It’s really, and it’s really just saying, I’m going to put a dollar for this purpose, and it’s going to be just for that purpose.
Austin Wilson:
Yeah.
Josh Robb:
And I’m going to put it here so that I remember it.
Austin Wilson:
And I’m stuck.
Josh Robb:
Yes.
Austin Wilson:
With that amount.
Josh Robb:
Yeah. Because you’re not carrying your credit cards or debit cards or checkbook or anything like that to be forced, or tempted to use that when you really want something.
Austin Wilson:
Yeah. It’s really easy to limit yourself.
Josh Robb:
Yeah, so that’s how it works. Pretty easy.
[9:00] – Dad Joke of the Week
Austin Wilson:
So, Josh.
Josh Robb:
Yeah?
Austin Wilson:
I have a dad joke of the week.
Josh Robb:
I’m ready.
Austin Wilson:
And I think it’s going to make you laugh.
Josh Robb:
Okay.
Austin Wilson:
Okay?
Josh Robb:
I will not drink anything while you talk.
Austin Wilson:
That’s right. The Gold Peak sweet tea…
Josh Robb:
Sweet tea.
Austin Wilson:
Is going to be taking a pause.
Josh Robb:
All right.
Austin Wilson:
So what is a chef’s favorite soft drink?
Josh Robb:
Ooh. A chef’s favorite soft drink. Hmm.
Austin Wilson:
First thing that comes to your mind.
Josh Robb:
I don’t drink a lot of soft drinks.
Austin Wilson:
Okay. So you’re supposed to say…
Josh Robb:
I was supposed say what?
Austin Wilson:
Baking soda!
Josh Robb:
Baking soda.
Austin Wilson:
And I would say…
Josh Robb:
Oh yeah, I get that baking soda, yeah, yeah.
Austin Wilson:
And I would say…
Josh Robb:
Gotcha.
Austin Wilson:
You would think so.
Josh Robb:
Yeah?
Austin Wilson:
But it’s actually Dr. Pepper.
Josh Robb:
Dr. Pepper. I gotcha.
Austin Wilson:
Ah!
Josh Robb:
Dr. Pepper.
Austin Wilson:
There you go. So that’s the dad joke of the week and back to what we were talking about, which is cash-based envelope, not envelope.
Josh Robb:
Envelope.
Austin Wilson:
Even say it wrong.
Josh Robb:
Envelope is an envelope is an envelope.
Austin Wilson:
So back to cash based budgeting.
Josh Robb:
Yes.
[9:50] – Cons of Cash-Based Budgeting
Austin Wilson:
Let’s look at the pros and cons for what seems to be a relatively simple method of running a budget.
Josh Robb:
Yes.
Austin Wilson:
So let’s start with the downside. So…
Josh Robb:
Okay, cons.
Austin Wilson:
What are the cons of cash-based budgeting?
Josh Robb:
Yeah.
Austin Wilson:
Now I can’t talk.
Josh Robb:
One is it’s time consuming. You mentioned going to the bank and depositing your money that you got.
Austin Wilson:
Right.
Josh Robb:
I think just going to the bank takes time.
Austin Wilson:
Yeah.
Josh Robb:
It’s inconvenience in my mind a lot of times.
Austin Wilson:
Yeah.
Josh Robb:
Unless you work at a bank, then I guess you’re there. But the other con, it’s easy to lose the money when you’re taking out a time period of money.
Austin Wilson:
Yeah.
Josh Robb:
Let’s say two weeks if you get paid every two weeks, or if you get paid once a month, a whole month’s worth, if you misplace that money, it’s a big deal.
Austin Wilson:
Or get robbed.
Josh Robb:
Or get robbed, which comes to number three of the cons. It’s not as safe.
Austin Wilson:
Okay. There you go.
Josh Robb:
Because not only are you carrying cash, but most credit cards have…
Austin Wilson:
Fraud protection.
Josh Robb:
Protection built into them, that if something happens, you can be made whole.
Austin Wilson:
Right, if you drop your envelope at the store, if you drop it at the store and don’t reach down and grab it, because you didn’t know you dropped it, someone’s literally going to take it and spend it, and you have no way of recouping it. You’re just out.
Josh Robb:
It’s gone. True story. Back when we were doing the cash system, my wife accidentally… She’s great. She’s awesome. She accidentally left some of our cash in a library book.
Austin Wilson:
And turned it in?
Josh Robb:
And turned the library book in.
Austin Wilson:
And?
Josh Robb:
And they called us and returned the money.
Austin Wilson:
Oh, very nice.
Josh Robb:
How awesome was that? Local library book, local library.
Austin Wilson:
That was Indiana?
Josh Robb:
No, this is here in Ohio.
Austin Wilson:
Really?
Josh Robb:
Hancock County, Findlay-Hancock County Library.
Austin Wilson:
They just thought she was paying…
Josh Robb:
Very honest people there. Very honest people there. They said, ah, I think you left some money in your book. I said yes, apparently, we did.
Austin Wilson:
That’s so funny.
Josh Robb:
And then it’s possible that you forget a category, and you’ve already put your money and spent, and then you’re playing catch up. So, for instance, like I said, what if there is a birthday that shows up last minute or someone calls, “Hey, I’m going out,” and you’re like, “Well, I already spent all…” There’s… it could get frustrating if you are very diligent in sticking to your envelopes that you just can’t really like budge and move money.
Austin Wilson:
You could have a special envelope in a safe for like, yeah.
Josh Robb:
And that’s actually honestly, back when we did this, if there was money left over at the end of the month, instead of spending that, I would actually put it aside.
Austin Wilson:
Just in case.
Josh Robb:
Just so that if we ran into a situation where something popped up we just really wanted to do, that would be a no guilt bucket of money we could spend from. Now, it’s just sitting somewhere. So, it’s not earning an interest or anything.
Austin Wilson:
Oh, like it is at the bank.
Josh Robb:
Yes. Right. So, it was just there, there were times where it would come up, we’d be like, “Hey, there’s somebody at the door and they’re selling Girl Scout cookies. Oh, I have a $10 that I had so we can buy some Girl Scout cookies.
[12:22] – Pros of Cash-Based Budgeting
Austin Wilson:
So let’s flip this discussion on its head.
Josh Robb:
Yes.
Austin Wilson:
And we are going to then look at the pros.
Josh Robb:
Pros!
Austin Wilson:
So what are some like some good things about this because this method it’s really popular with the Dave Ramsey crowd.
Josh Robb:
Right, yep.
Austin Wilson:
And this is kind of his big thing of how he suggests people oftentimes manage their funds.
Josh Robb:
At least to start with, yeah.
Austin Wilson:
Yeah. And so it’s very popular. So obviously there are some things that work for it. What are those?
Josh Robb:
Yeah. So it’s easy to track your spending, right?
Austin Wilson:
It’s all cash, yeah.
Josh Robb:
If I have a hundred dollars for the groceries and I have $20 left in that bucket, I must have spent $80 on groceries, right. It’s pretty easy to track that.
Austin Wilson:
That doesn’t go very far nowadays on groceries.
Josh Robb:
No, it does Not go very far for groceries. It reduces your impulse spending, because if I can only spend the cash I have on hand if I walk into the store, oh that’s awesome. I really want that. I didn’t bring enough cash for that. Well, it forces me to go home, get the cash and come back, which gives you a lot of time to think about, do I actually really want and need this?
Austin Wilson:
And there’s a, you have an attachment to the cash when it’s literal cash in your hand, where…
Josh Robb:
Yes, psychologically, it’s harder to spend that when you’re handing it over.
Austin Wilson:
Yeah. You’re going to be like, if I have to fork over a $100 bill or something for this, I’m going to be like, oh my goodness, this is so horrible.
Josh Robb:
Yep. And it does encourage saving because what it does is if one of my buckets is saving, it just doesn’t come with me in my cash, right? And It stays in the bank, because you go to do your withdrawal, just like your utilities and everything else. It encourages, because I’m never going to see that, because I don’t have any way of accessing. I’m not taking it out and hoping it’s there at the end. So those are the pros, like you said, it’s a very popular method, and it’s one of those I would say for a lot of people starting out, it’s a nice process.
Austin Wilson:
Yeah. It’s a low risk.
Josh Robb:
Yes.
Austin Wilson:
Like if you have a problem with credit card debt or credit card spending…
Josh Robb:
Yes.
Austin Wilson:
This is like the antidote to that. Because you can’t have that problem anymore, all of a sudden you are unable. So this is probably designed for people in the transition from maybe living a life with more debt or credit card issues or whatever, to all of a sudden, Hey, I really need to get a handle on this. This is like the 180 from that.
Josh Robb:
Yes.
Austin Wilson:
Right.
Josh Robb:
It’s the idea, if you find yourself saying where did all my money go, this is a way that’ll help you answer that because you’re going to remember handing that money over.
Austin Wilson:
Oh yeah.
Josh Robb:
So yeah, you’re right. It’s reversed to spending with your card.
Austin Wilson:
Yeah.
[14:38] – Cash vs Card
Josh Robb:
So Austin, I’m going to ask you because we’ve had episodes about credit cards, right?
Austin Wilson:
Yeah.
Josh Robb:
Just in general, I mentioned pros and cons. One of the ones I didn’t mention, you mentioned it, is you miss out on some benefits possibly.
Austin Wilson:
Right.
Josh Robb:
By using cash.
Austin Wilson:
Yeah.
Josh Robb:
Cash does not have any auxiliary benefits tied to it.
Austin Wilson:
Yeah. A couple of those benefits are yes, obviously we mentioned two of them, really. So something like rewards, cash back, whatever that is when not typically with debit cards, this is with credit cards. You’re going to have the ability to earn a percentage or points or discounts or whatever when you use that card.
Josh Robb:
Yep.
Austin Wilson:
And we would say that’s okay, as long as you’re paying it off in full every month, right?
Josh Robb:
Yep.
Austin Wilson:
So that’s one benefit of that, which you don’t get with cash. And the other is the fraud protection and think about you can’t buy things online with cash.
Josh Robb:
Yeah.
Austin Wilson:
That’s a really hard thing.
Josh Robb:
So Amazon does not like this method.
Austin Wilson:
Yeah, you don’t have the ability to buy things online, but also you’re just not protected at all.
Josh Robb:
Yeah, but even so credit cards have extended warranties, things like that they have as a auxiliary benefit. The other one too, is building your credit score.
Austin Wilson:
Oh, this does nothing for that. Which by the way, plug, we do have an episode on understanding your credit score. So we would link that in the show notes.
Josh Robb:
Yes.
Austin Wilson:
I would give that a listen because it’s not really relevant to the people who are using cash for everything, but you know what, if you’re using cash for everything, you probably don’t have $200,000 dollars sitting around for a house. So probably good to be thinking about your credit score as it relates to loan.
[16:04] – Is This Right For You?
Josh Robb:
Yeah. So is this the right way? What do you think?
Austin Wilson:
Oh man, I’m going to say…
Josh Robb:
I will ask you, let me you, Austin, is this the right way?
Austin Wilson:
Here’s my answer.
Josh Robb:
Yes.
Austin Wilson:
In moderation. No, that’s the typical Josh answer.
Josh Robb:
That’s my answer.
Austin Wilson:
I think it really depends on the situation.
Josh Robb:
Yeah.
Austin Wilson:
Because like I said earlier, if you’re that person who has a problem with spending typically with credit cards you got a lot of debt or whatever and you need to break the habit, this is probably a really great solution for you because it’s going to change your habits completely and make you really think about your finances. I would say this is probably a little bit too strict for someone who has a good handle on their finances and knows where their money’s going all the time or is just in a different financially free situation.
Josh Robb:
Yep.
Austin Wilson:
For someone like that, maybe they could be a little bit more flexible.
Josh Robb:
Yep. I’ve run into, like you said, a great starting point. If you’re saying I’m really struggling, this just kind of forces you into the habits because if you are actually doing it right where you’re not bringing, cutting them up or just leaving at home your credit card and debit cards and stuff and forced to use cash, it really does reinforce those habits. Now my own opinion is that with technology nowadays, you could actually do these envelope system with electronic apps.
Austin Wilson:
Oh yeah. For sure.
Josh Robb:
So you’re still spending and bucketing, but you could still use a card or something, and then it will update you on what you’ve spent out of. Also I like, if you start out here and you’re like, okay, I’m getting a feel for my budget. These are going good. You could then I call it like a hybrid method, is I can allow myself to use a card of some sort for certain things. But the ones I just tend to overspend on, I’m going to keep in cash. So for instance, our family, one of the first things we switched away from cash was gas for our vehicles because…
Austin Wilson:
It’s not really discretionary.
Josh Robb:
Because it’s so inconvenient. Well, and it’s so inconvenient, especially once we had kids to walk in and pay.
Austin Wilson:
Yeah.
Josh Robb:
Right? Just I want to do it at the pump. I want to swipe my card so I don’t have to go anywhere, right? And so that was a debate where we’re like, let’s just not do that, because it varies.
Austin Wilson:
Right.
Josh Robb:
I mean, it’s… you’re right, it’s not discretionary, but it varies. So, it’s not a flat one that you know every month is spending X.
Austin Wilson:
Right.
Josh Robb:
But we were pretty consistent with that spending. I mean, you’re not changing too much of driving habits.
Austin Wilson:
Yep.
Josh Robb:
And two, for the convenience factor of with little kids, especially of getting them out of the car and bringing them in or do you leave them in the car? Which all that stuff it’s like, okay, this is just, don’t even worry about cash there.
Austin Wilson:
Right.
Josh Robb:
And so then we worked away from that, and it was like, okay, we took a hybrid approach and it says, okay, what else is it? Okay. Online purchases. Well, okay. What are the things we tend to buy online? And you work through that. So we were using cash for certain things, but other things, it wasn’t. So for the last thing we went away from cash was lunch, eating out.
Austin Wilson:
Oh, yeah.
Josh Robb:
Because that was the one where I could tend to easily overspend. Just, oh, I’m just going to grab a quick sandwich. I’m going to go grab a quick bite to eat.
Austin Wilson:
Oh, I love lunch.
Josh Robb:
Just over… and you spend without over the time period, it adds up.
Austin Wilson:
Yep.
Josh Robb:
So that was the last thing I used cash or was in my cash budget was everything else was using cards and automatic we had, everything was great. And then I just got cash out just for my spending for lunches.
Austin Wilson:
Right. Yeah.
Josh Robb:
Not even dining out at dinner with family.
Austin Wilson:
Just lunch.
Josh Robb:
Just lunches.
Austin Wilson:
It’s the lunch budget.
Josh Robb:
Because that was the way it was.
Austin Wilson:
Yep.
Josh Robb:
So I took a hybrid approach, worked for me. That was a nice way of saying, okay, convenience slash needing the discipline. We found a balance between us.
Austin Wilson:
Yep. Everyone has to do what works for them.
Josh Robb:
Yes.
Austin Wilson:
And as long as you are working towards a financial situation where you are not a slave to your debt.
Josh Robb:
Yeah.
Austin Wilson:
Then, hey, you are going to be better off than most people and you can choose what works for you. Everyone’s going to take a different approach to that. So that’s why my answer was it depends.
[19:45] – Situational Approach
Josh Robb:
Depends. Yep. So the last one, one last thing before you close up…
Austin Wilson:
Ooh, bring it. I know.
Josh Robb:
Is the other way this works is situational. For instance, I’m going on vacation, maybe you just take out the cash that you’re going to spend on vacation and that limits you from overspending while you’re there.
Austin Wilson:
A traveler’s check.
Josh Robb:
Traveler’s check.
Austin Wilson:
I don’t even know what that is.
Josh Robb:
Did you do those?
Austin Wilson:
I don’t even…
Josh Robb:
Oh man. I have a story about that. We’re driving had travelers checks.
Austin Wilson:
Okay.
Josh Robb:
We’re in the United States.
Austin Wilson:
Yeah.
Josh Robb:
We’re not like going anywhere crazy. We’re just driving south. And we decided to drive through the night to get there.
Austin Wilson:
All right, bad idea.
Josh Robb:
So driving along, it was great. Because there’s no traffic driving along, going to get there in the morning. Well, we hit a toll road. So, we’re driving on a toll road, we get to the first toll stop.
Austin Wilson:
And you have no cash.
Josh Robb:
But I have traveler’s checks. They’re as good as cash, right? That’s how they’re sold. So, I go to pay and there’s an attendant and the attendant is like, “We don’t take travelers checks.” Well I don’t have cash so I don’t what you want me to do?
Austin Wilson:
So you had to fill out the envelope thing and mail it in?
Josh Robb:
No, he is like took my license and stuff and he is like between here and the next one, get cash, you’d go to the convenience store or whatever and then pay for that one and this one or whatever, I don’t know. So, then I stopped at the convenience store. Well, it’s like 2:00 in the morning so hardly anything’s open, I finally find a gas station that’s open. So I had to go buy something to get cash.
Austin Wilson:
Yeah.
Josh Robb:
So then, which is a whole mess.
Austin Wilson:
While we’re on these crazy stories.
Josh Robb:
I hate traveler’s checks.
Austin Wilson:
While we’re on these crazy stories about toll roads.
Josh Robb:
Yes.
Austin Wilson:
This isn’t that related.
Josh Robb:
Yes.
Austin Wilson:
But my wife and I, and at that point, our one year old daughter, we’re on vacation in Florida.
Josh Robb:
Yep.
Austin Wilson:
So we were driving, we went to go visit my cousin, #whatsupjacob hashtag.
Josh Robb:
Yeah. He has a hashtag, his own hashtag?
Austin Wilson:
He has a hashtag.
Josh Robb:
All right.
Austin Wilson:
So we went to go visit him and he lives in the New Smyrna Beach, South of Daytona.
Josh Robb:
Okay.
Austin Wilson:
Region of Florida, and we were staying near Orlando. So, it’s like an hour and a half drive through Florida to get there. So anyway, we had a great day hanging out with him on the beach and we had to go back to Orlando to stay.
Josh Robb:
Yep.
Austin Wilson:
Toll roads the entire way I have cash, man. I got cash. I’m ready to go. I’m ready to pay these tolls. We get off on our exit and guess what? They only take exact change.
Josh Robb:
Exact change, that’s how they get ya.
Austin Wilson:
Not even… I have all the cash.
Josh Robb:
Yeah. They want change.
Austin Wilson:
But they want quarters.
Josh Robb:
Quarters, they like quarters.
Austin Wilson:
So I had to take the envelope…
Josh Robb:
Ah, yeah.
Austin Wilson:
Which I was in a rental car.
Josh Robb:
Ah, yeah.
Austin Wilson:
They had to take the envelope, and I had to go yada, yada, yada, write down what number, where I was, what the license plate was and then take it and mail in a check for the exact amount…
Josh Robb:
Of what?
Austin Wilson:
$1.75 or something.
Josh Robb:
Hardly, yeah.
Austin Wilson:
Yeah. It was ridiculous. And then mail it in once I got back to Ohio, because I didn’t bring a check.
Josh Robb:
Really, you didn’t have a check? Yeah.
Austin Wilson:
Cause I’m on vacation. So anyway, that’s my funny story.
Josh Robb:
Yes.
Austin Wilson:
But anyway, I think we need to settle something once and for all.
Josh Robb:
All right, what do we got?
Austin Wilson:
We’re going to put up a Twitter poll on Thursday, when this episode drops. The Twitter poll is going to be, “Are you team envelope with an O.”
Josh Robb:
We’ll still spell it the same. Just your…
Austin Wilson:
Nope. Nope.
Josh Robb:
No fancy pronunciation.
Austin Wilson:
Or are you team envelope?
Josh Robb:
Oh…
Austin Wilson:
The right way, with me.
Josh Robb:
Or are you team when you’re writing fancy stationary envelope.
Austin Wilson:
So vote on our Twitter poll and please share this episode. If you have someone that was asking about the cash-based envelope budgeting method and is curious about that because maybe our thoughts would give them a little bit of clarity on what’s going on with that. So share this episode with friends and family. And if you have any other ideas or things you would like us to talk about.
Josh Robb:
Or a good story, about how an envelope method worked for you.
Austin Wilson:
Or a good story, or an envelope method.
Josh Robb:
Who knows?
Austin Wilson:
Please email that to us. hello@theinvesteddads.com. Well, until next Thursday…have a great week.
Josh Robb:
Bye.
Outro:
Thank you for listening to the Invested Dads podcast. This episode has ended, but your journey towards a better financial future, doesn’t have to head over to the investeddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode. Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management, all opinions expressed by Josh, Austin or any podcast guest are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management.
This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions or forecast provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.
