Tuesday, April 13, 2010

Debit vs Credit vs Cash??

I babbled earlier about budgets, and how to teach your kiddos...but now my question is how do you maintain it? We have had a budget for years and have been kind of "lazy budgeters" That meaning we have a relatively good idea where our money goes, but not exact. I am thinking that there is some serious money floating out there that was not exactly accounted for.

I love the Dave Ramsey system. We are working though baby step 2 and paying off our school loans and adoption loans. I know that Dave strongly urges us to use cash and an envelope system but that scares me honestly! I like my wiggle room...but I know that we could get SO much farther if we truely balanced to zero at the end of the month.

So for all you envelope users out there I have some questions:

a. How do you pay for gas? leaving Sam in the car when I go into pay is unsafe, and dragging him out of the car is just a pain...ideas?

b. Do you actually use envelopes? Or some other system??

c. How do you do it...do you take money out each paycheck? Or do you take it out at the first of the month?

d. Is it better to start with all your envelopes at once, or work up to them. I have been thinking about just starting with the Grocery and spending money envelopes but maybe I should begin with more than that...

e. How do you shop online? Do you use your debit card or credit card? I know that Dave wants us to cut up our cards but I havent if you want to be honest. We dont use them, dont carry them. But they are a sense of security for me....

Help a girl out, I am excited but scared to try this out. I figure I can try it out for a month and see what happens...what do you all think?


Anonymous,  April 13, 2010 at 1:02 PM  

I do not know this particular system, but my one worry with cash is it is easily lost or stolen and you get none of it back when that happens. If you use a credit card like cash, meaning you only spend money you know you have and you never go over that amount, credit cards are very practical things.

You pointed out some of the biggies- gas, online shopping, etc. Remember too that having no credit cards can sometimes hurt your credit score which means you will pay more for a home or refinance. Personally we have gotten rid of a few and kept others. Credit cards also have some nice perks for using them- ours gives us a % on every purchase and they send it right to our mortgage company once a year. Its like getting free money that way!

You could always try a pre-loaded credit card. You load a specific amount onto the card and you can only spend what is there. Its just like cash but if you lose it, they can cancel the card and you are only liable for a small amount.

Erin April 13, 2010 at 5:34 PM  

hi again! :) i wanted to comment on this earlier, but didn't have enough time...

my husband and i started dave ramsey a few years back and LOVED it. we have sort of slacked since then, but this is how we did/do it.

my husband gets paid every two weeks, so i set all of our monthly bills to his paychecks- mortgage, car payment, car insurance, credit card, student loan, utilities, etc... i split them in half according to how much they are each month so about the same amount comes out of each paycheck every two weeks... this is harder for a paycheck that fluctuates, but my husband is salary so we don't have that issue.

i get paid every two weeks, but all my money gets pulled out as cash... and that cash gets dispersed into envelopes for other things: grocery, restaurants, gas, hair cuts, doctors, clothing, etc... things like clothing may start to add up if clothing is not a frequent purchase, and in that case i will cap it and put that bi-weekly amount towards debt.

after we figured all this out, where our money was actually going, we found there was a bit of money left over that we could pay above and beyond on one of our credit cards... once that credit card is paid off, you go to the next one. we got a lot paid off when we first started, this past year we have really slacked, my hours got cut at work, i had a baby so there was maternity leave, and other expenses with all of that as well... (then, couponing started so we could get back on our feet and start again!!!) :) dave ramsey is easy, it is a rewarding feeling when you feel in control of your money...

as far as items you may prefer to pay with a debit card rather than cash (gas) you could instead of pulling that amount out of your check as cash, deposit only that amount into the bank, keep track of it like on its own little register, and go from there.

my husband and i are bound and determined to get rid of all but MAYBE one of our credit cards. my husband feels that we need at least one credit card in case we have a huge emergency for some reason. dave ramsey is against using any sort of credit-- EVEN FOR CARS AND HOUSES!! which i think in this day is nuts, it would be awesome, but very impractical.

getting in control of my money was the main thing for me... it really helped me in that way.

of course, above all, i know that God will take care of us... i know that He will honor His promise. this system/couponing allows us to free up some money to give back more too.

i would recommend the dave ramsey approach, however he is rather extreme... so do what you are comfortable with. :)

Krissy April 13, 2010 at 8:41 PM  

I have been so bad with saving money, but I just started recently and I am doing pretty well. I split in threes right now. I have three envelopes which would be my summer trip envelope, saving and spending. It's been going well, so far. I know that I need to save and that's the only way I can think of doing it. I don't have anymore credit cards. I'm done with those. They get me into more trouble than anything else.

Found you from UPB10 and I love your blog! Following you now! I hope you stop by and follow us as well! Have a great week!


Kyrstin April 13, 2010 at 11:52 PM  

I have been thinking about trying this system, but I don't know where to start. I have to research it a little bit more before we start it. I am following you back from Friday Follow!

amy April 14, 2010 at 9:14 AM  

Thanks for all your advice ladies!! You all brought up some great points. I think Hubs and I are going to try it with his next paycheck...let ya know how it turns out. We arent cutting up our cards or anything because like frteach said I dont want to damage my credit score. I am thinking that a prepaid card for gas is a good idea as well (DUH..I did a post on SCRIP) so we will see how that works and move on from there. I am thinking I will do a grocery and a spending money envelope at first. Thanks so much for all your help!

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