This post could also be titled, "How to Never Go Over Your Budget" or "How to Curb Online Shopping." This is the method I have used for years and it has worked very well for me. I have found that budgets usually fail because of one of two things: either they are not realistic budgets (i.e. budgeting $200 for groceries when you need $400) or there is too much left to chance or willpower.
I think awareness and intentionality must be infused into our financial transactions and decisions, and I believe in a slower approach towards money management. I'm not one that espouses a quick formula that allows you to keep up with the busyness of life and never have to think about money yet somehow manage it well. I believe in simplicity and that the simplest methods are usually the best and most sustainable, but I am not one to think that an automated or hands off approach is the way to go.
I started out with a cash budget when we first started budgeting and I have found that it is the best and least complicated method for me. The most frequently asked questions I have gotten over the years is how to make a cash budget work and what to do about online purchases.
I have a payday routine so every two weeks on payday I go online and pay every bill that is due during that pay period and check them off. Then I figure out how much to take out in cash and how much to contribute to sinking funds. Savings is automatically deposited and is the only thing that is automated with our finances. I used to take sinking funds out in cash but have started leaving them in the bank in separate accounts and move them to the main checking account when we need to use money out of that fund. These are usually one big purchase like buying school books for the year, getting the season's clothing, or doing vehicle maintenance.
If there are any online purchases that need to be made, this is when I make them. If I think of things that I need/want in between paydays, I simply write it on a list and wait. This makes sure there are no impulse purchases and it makes any purchase intentional and thought through. Sometimes since I have to wait, I decide I really don't need the item after all or it isn't the best use of our money at that time. After making any online purchases, I deduct the amount from what I take out in cash.
For example, if I make an Azure order for $70 then I would deduct the $70 from the $250 in groceries for that pay period and only take $180 out in cash. If I buy a book online out of my personal money for $15 then I would only take out $35 in cash instead of my normal $50. After I have paid bills, purchased anything needed online, and moved money to sinking funds, I take the remainder out in cash. I always leave about a $50 buffer in the account, which could be adjusted up if that makes you feel better. The key here is to not leave so much in the account that it is easy to make unplanned purchases since you have money sitting there.
In this way I have forced myself to make each purchase and transaction with thought and intentionality. By making myself wait in between paydays for online purchases I not only stick to my budget but I give myself time to really weigh things and decide what is in line with our priorities. By using cash for all the other purchases it is the physical pain and awareness that cash brings that helps curb purchases that happen more on the fly and keeps me accountable and aware of my spending and the cost of things. It simplifies tracking throughout the week/month as well.
My cash categories are Personal, Food, and Miscellaneous. Our Miscellaneous category covers fun activities, any eating out, needed household purchases, etc. It basically covers anything and everything that is not a major planned purchase or falls under the food or personal category. Anything week to week and month to month that is needed/wanted must come out of this amount.
The other thing that most people might have as well is gas purchases. I haven't done cash for gas purchases as it is a hassle to go in and prepay with children to unload and reload. I always kept the gas budget in our bank account and used the debit card to purchase gas. I knew that the only thing in the account was our account buffer and gas budget. That kept tracking simple. Another thing I have thought about doing in the past was getting a prepaid debit card and loading the gas amount on it. I haven't ever done that but it is an option. I have one friend who has a separate account and debit card that is only used for gas. Currently we buy all our gas from our local co-op and they bill us once a month so I pay for all our gas purchases at one time each month. That keeps it simple and I treat it as another bill. It keeps us from having to track each debit transaction for gas throughout the month which is also nice.
I carry all the food budget with me as I am the only one that purchases food on a regular basis. My husband and I both get personal money and then we split the miscellaneous amount between us so we each have cash to use while we are out and about.
By setting a time aside each payday to take care of the necessary things and put the money in its place, I simply follow the plan until the next payday. It keeps it simple and makes sure that good intentions don't get swallowed up in the rhythm of life. This method has served me well. I'd love to know what your money routine is if you care to share below!