When my wife Debbie and I were first married, we were on a very strict budget — I mean a death grip budget — where every dime was needed and every penny was accounted for. And even though we were extremely strict with our money, we didn’t go without. We didn’t go hungry and we didn’t go in debt. In fact, it was not even a difficult financial time for us but more of a disciplined one; a lean but happy one. And actually it was because our household budget was so severe that this was an extremely secure and safe time for us — because no matter what happened financially, we had a budget envelope set aside for it.

Now, my routine at that time was pretty set as well. Every payday I would leave work at lunch to cash my check and when I did, I had the guilty pleasure of peeling off the very top seven dollars — we had calculated both our checks down to what was needed and mine held an extra seven bucks in it — and I would get to just blow that money. The bulk of the check was converted into cash to be taken  home and placed in the various envelopes where it was needed but that first seven bucks, that top seven bucks, was all mine, baby. And that meant I could spend it on — any — thing — I — wanted.

And I did.

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It took me about nine minutes.

Because the bank we used on Court Street in Binghamton, NY was only a block away from the greatest delicatessen north of Flatbush: The Old World Deli. And every Friday, I would wait in line with the downtown lunch crowd along with the smells of pastrami and corned beef and I would order a sandwich the size of my head, a pickle and a drink. And even though I would try to make the lunch last, even though I would try and savor it, the meal would be over in less then ten minutes. And once again I would be broke.

Happy, but broke.

Now this type of severe budgeting is not a great way to plan because it breaks the first financial rule of, pay yourself first — and pay yourself more then seven dollars. And it also shows what happens when you are ultra strict about your finances — and what happens when you do get a few bucks in your pocket.

But, it worked for us.


Now, the best and most pure method of creating a budget is to use a cash system. A simple cash envelope system — separate envelopes marked with each budget area and then placing the cash needed in each envelope — is the best method by far. No math errors. No confusion. If you don’t have enough money in the envelope, then you don’t have enough money for that item.

However, whether we like it or not we are very close to becoming a cashless society. Our paychecks are directly deposited. Many of us pay bills electronically and other items we need we use our debit or credit cards — and electronic bits and bytes bounce back and forth where dollars and coins once did. In fact many economists estimate that paper checks may be completely obsolete by 2020.

On top of that, we are becoming a society that is not only e-payment friendly, but is actually becoming cash-resistant. Because the business world doesn’t want you to use cash.


Well, from the merchant’s perspective, the less cash a business takes in means less risk of error or theft. It also means there is less need to make physical bank deposits and if you are purchase from a line of credit, then your buying power has increased. So a merchant sells less to those using cash than those using a line of credit.

From a banking perspective, credit card interest is a financial goldmine but even using debit cards make banks a lot of money — I mean a lot of money. Because every time you use your debit card as a credit card, the merchant pays a bank fee. And every time you use the debit card as a debit card, the bank will either charge you a POS (Point Of Sale) fee, or build in a monthly cost into your account. In fact, many banks are raising these POS fees to discourage consumers from using the cards as debit cards, because they can make so much more income by charging the merchants for the credit transaction.

And from a consumer perspective, it’s simply becoming easier to use credit or debit cards. We can now use cards in vending machines, in parking meters and many stores have drastically dropped — or completely eliminated — purchase limits on credit and debit cards; which means we can buy a pack of gum or a soda and put it on a card. And since our payroll is often direct deposited anyway, using the debit card from our account just saves a step of running to the bank or ATM.

So how do we create a cash budget in a cashless society?

Well, the best way to do this is to use cash in those areas that we have the most flexibility — and therefore the largest margin for error.


1. Gather data going out. Grab all your bills, statements, account data and begin listing all your expenses — and not only monthly expenses, if you pay something once or twice a year you need to take a portion out for that monthly. Include in this list everything; car insurance, mortgage or rent, car payments, entertainment, groceries, utilities, dry cleaning, garbage services, car maintenance, retirement or college savings, vacations. Everything.

2. Gather data coming in. List all the monthly income. Record all of your sources of income — if you do something once or twice a year that earns income include that along with your regular income.

3. Breakdown expenses. Everything you owe is in one of two categories. It’s either fixed — meaning it is the same payment month after month — or its variable — meaning the expense can change, such as  groceries, entertainment, vacations, etc. Use cash for all your variable expenses.

4. Total everything. If your total for expenses is less than the total for income, good. We’re off to a great start. This means you will have some wiggle room to whittle down any debt you have or save and invest. If your list shows more expense going out then income coming in, you’ll need to make some changes. Usually this is tied to a high debt load, so look at that first and see what can be done to reduce it.

5. Adjust, adjust, adjust. It will take about three months to tweak your budget so it works for you. There will be items you forgot or things change. The more accurate the budget is, the more of a tool it will be for you.

And remember a high income is not needed for financial security — the more you budget and stay out of debt, the better you will be. My cousin, Rena, was the sole breadwinner of her family. She bought a house, raised two kids, put them both through college and has a nice retirement lined up, all on the salary of a McDonalds Manager.



Everett De Morier has appeared on CNN, Fox News Network, NPR, ABC, as well as in The New York Times and The London Times. He is the author of Crib Notes for the First Year of Marriage: A...