My Thoughts on Cash-Only Budgeting

Dave Ramsey is one of the country's most popular personalities on personal finance.  Millions of Americans, including myself, have found inspiration from Dave to pay off debt and start living a financially independent life.

If you are a follower of Mr. Ramsey, you will know that he is famous for promoting a "cash-only" lifestyle.  For many people, switching to a cash-only budget is extremely beneficial, but it doesn't have to last forever.

Pros of a Cash-Only Budget

No Overspending

Cutting up your credit and debit cards and paying all expenses in cash is a sure-fire way to keep you from overspending.  For most people in debt, this is the type of behavior change that is needed.  As Dave says, it should hurt a little when you spend your money with cash.

You are much more aware of your spending when you have to take the cash out of your envelope and hand it to someone else.  You may even think twice about making a purchase.

Besides keeping your spending in check, there are certain scenarios where paying for cash might actually save you some money.


Credit card companies charge companies a fee each time you use your credit card to purchase something.  This fee could be anywhere from 2 to 3.5% of the charge.   If you use your credit card to spend $100 at a restaurant, the credit card company might get $3 and the restaurant only keeps $97.  Because of this fee, some companies might even give you a discount for paying in cash.

My wife and I actually negotiated a discount on our wedding venue because we agreed to pay in cash.  And when they said cash, they meant cash.  No cashier's checks or money orders...cold, hard cash.  I was expecting to get a briefcase handcuffed to me on the way out of the bank that day, but no luck.  Maybe that's just in movies??

Off the Grid

This is more of a tongue-in-cheek comment, but spending all cash can keep you off the grid.  If you're paranoid about the government secretly collecting data on all your purchases, pay in cash!

Appreciation for Saving

One of the biggest benefits to paying cash is that it helps you build a better appreciation for the things you purchase.  By taking the time to save up money for your purchases, you might find that you don't spend your hard earned and saved money for things you don't really need.

The American culture has transformed into one of instant gratification and the need to keep up with the Jones's in order to chase "happiness."   Most of us have way more crap than we think we need.

Cons of Carrying Cash


One of the more obvious arguments against a cash-only budget is the lack of security.  Carrying large amounts of cash can be dangerous, and it gets lost or stolen, you're pretty much out of luck.

Many credit card companies offer protections in case your card is ever lost or stolen.  Your losses are usually limited to $50 for any unauthorized charges after your card is stolen which is much less risky if you carry more than $50 in cash.

Most consumers don't take the time to read all the fine print that comes along with a new credit card, but if they did, they would see that some credit cards will give even extra protection to buyers.

Just by using your credit card to make a purchase, some card companies will give you an extra year of warranty protection after the store warranty ends.  Your purchase might also be protected if you didn't get what you paid for.

Let's say you paid $2000 for a photo booth at your wedding, and they never showed up, or they showed up but lost all your pictures.  If the photo booth company didn't give you a refund, you could dispute the charge with the credit card company, and the credit card company might credit you for that purchase.   If you paid in cash, you'd be out of luck unless you wanted to spend even more money in court.

Ever purchase something, and two weeks later you see it on sale for half the price?  Some credit cards will even refund you the difference if a price dropped after you made the purchase.

Did I inspire you to go back and check your credit card benefits??  Not all credit card companies offer these services, and certain limits may apply, but it's worth a look!

I should note that some debit cards will offer some protection, but it's usually not as good the credit card companies offer.   They, of course, are hoping you pay a lot in interest to cover those costs, but you are smart and pay your cards off in full every month!


Carrying cash could become a logistical pain, especially if you are using the envelope method of budgeting.  You better make sure you have the right envelope before you leave the house!

Actually carrying the cash isn't usually a big negative, but what happens when you go to check-in to a hotel or rent a car?  Usually these companies require a credit or debit card when you check-in.   Now, I know people that have gotten around these requirements, but it does make your life a little more difficult.

Budgeting can also be a challenge if someone has to use a debit card because they were out and didn't have the cash handy for a purchase.  You have to remember to account for the debit purchases in your cash envelopes.

Harder to Track Spending

With all the technology today, many budgeting tools can connect to your bank and will link all of your transactions.  For a data nerd like myself, it's nice to have easy access to all those transactions.  For some people, they like having the automation.

My wife and I still manually log all of our transactions into our budget which helps us strike a balance between the convenience of using plastic and the awareness of all our transactions. We still like having a bit of pain when it comes to our spending!


OK, if you're comfortable with your spending habits, you've built a solid budget, you rarely go over budget, but you're still paying only cash or debit cards, you are missing out on the magical world of credit card points.  Seriously, people write blogs and make a living on this shit.

I'm sure you've seen all the commercials about cash-back here and 2X miles there.  Most credit cards offer some type of reward system for using their cards.  Certain cards might give you a 2% refund on every purchase you make, some give higher percentages back on certain categories like gas and travel, others give you "miles" for every dollar you spend.  You can redeem these rewards for a statement credit, travel, cash, or gift cards.

If you use your credit card for all your purchases and spend $20,000 over the year, you might get $400 in cash back that you can use as you please.  Some cards will give you a $500 or $1000 bonus if you spend a certain amount within the first 3 months of activating your card.  It all adds up!  We've taken a few trips just from the reward money we received from making purchases we would have made anyway.

The trick is, you still have to budget.  Don't spend a dollar more on your credit card than what you have already budgeted for the month.  Pay your credit card off each month so you don't pay a cent in interest.   Credit card companies have a nice word for people like us..."deadbeats."   Feels good, doesn't it?

This all takes discipline, so don't stop cash spending until you're comfortable with your spending habits.  You might even try a mixture of the two.  Use a card to pay for things like gas and groceries, but keep paying cash for everything else until you are comfortable.


If you're struggling with your spending, you should 100% consider a cash-only budget.  None of the cons I described above will ever outweigh the freedom and relief you will feel once you have your spending under control.  I have a lot of respect for people that continue to only pay cash even though they've been keeping a strict budget for years.  Stick it to the man!

Once you built up some good budgeting habits, it's OK to use credit and debit cards responsibly.  Just because you are using a credit card to make a purchase doesn't mean that you haven't taken the time to save for that purchase.  You are still keeping the same budgeting principals.  The money you need to make that purchase should already be in your checking account so you can easily transfer the funds to the card.

If you have tried out a cash-only budget, I'd love to hear from you!  Tell us in the comments what worked and didn't work for you!