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Money Mastery: How to Use the Cash-Only Budget
Money Mastery: How to Use the Cash-Only Budget
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Money Management

Money Mastery: How to Use the Cash-Only Budget

Eunniah Mbabazi
April 28, 2022

There are various methods of budgeting. Whichever you choose has to be suitable to your financial goals, income and your lifestyle. Often you have heard about the common 50/30/20 budgeting style for beginners - you can read about it in our article here. Today we look at another method of budgeting called the cash-only budgeting method.

What is Cash-Only Budgeting

This method is also known as “Envelope Budgeting,”. It is where you use cash as your spending medium. In this method, you should not use any cards and in extension, mobile money - the main reason being that the detachment that comes with this type of spending can encourage overspending.

What you are supposed to do is allot your money to separate categories you create and then withdraw the cash from your checking account. You then slot the cash in various envelopes that are labelled according to your categories.

Let’s use a food budget as an example.

If you have a Ksh5,000 a month food shopping budget, you would withdraw that same amount in cash from your account and then put it into the envelope labelled “food”. How straightforward is that?

How to use the Cash-Only Budget

1. Choose A Reasonable Amount For Your Monthly Expenditure

For you to do this, you have to take a look at the total sum of your monthly income. if your income varies every month, then the average will do. Then, choose a reasonable amount to spend. While doing this you have to keep in mind that your total expenses should not exceed your total monthly income

For instance, if your average monthly income is Ksh20,000, you can decide to set your spending at Ksh16,000 a month and put the remaining Kes 4,000 in your savings account. remember that the expenditure also includes your essential expenses including housing, utilities etc.

2. Choose the Categories to Switch to Cash

The second step is to determine budget categories that will work as cash-only. Some expenses will not necessarily be paid using cash, such as your mortgage or your HELB and other loan repayments.

For these types of expenses, you can be allowed to make the payments online or using your card or a cheque. But for categories where you can pay in cash, determine those in which you consistently overspend. This could be entertainment, groceries, clothing or eat-out. Almost everyone has a problem area that results in overspending. Once you realise what yours is, you can switch it over to cash to curb your spending.

3. Label Each Envelope For Each Category

Keeping your cash in well-labelled envelopes will allow you to easily know where your money is located aside from allowing you to easily track your monthly expenditure in each category. Get as many envelopes as your selected categories in your budget, and label them.  

4. Put the Predetermined Amounts of Cash In Their Respective Envelopes

After labelling your envelopes, place the cash that you have indicated on your budget. You will probably need to withdraw the money from your bank's ATM, or withdraw cash over-the-counter at the nearest branch of your bank.

Once the envelopes are filled with cash, you will need to treat them with extra care. For example, you shouldn’t leave an envelope filled with cash on your desk at work or leave it on the seat of your car.

If you find it easier to break the money up by week, so be it. So, if you have set Ksh5,000 per month for food shopping, you can put Ksh1,250 in the "Food" envelope at the beginning or end of every week. This will prevent you from using the full Ksh5000 in just two weeks, and having no money to buy food for the rest of the month.

5. Stop Using Your Cards/Mobile Money for These Categories

The following step is to put away your cards. Stop using your debit/credit card, your cheque book, mobile money or banking app, to take care of anything in any of those categories.

If you are unable to do that, you could consider leaving your cards at home every time you go out and cancel any automatic payments you might have enabled online, such as automatic payment for your Netflix subscription. This should help you break away from bad financial habits.

6. Set Up a Time to Take Out the Cash

For you to succeed at a cash-only budget, you have to get the money and separate it into categories. This could mean a trip to the ATM on your payday or a different set day.

7. Plan Ahead When You Go to Spend

This budgeting style requires that you learn to plan ahead. It would not be a good idea to carry huge sums of cash with you all of the time. So leave your grocery envelope at home unless you are planning to visit the grocery store, and take only the amount you need. This will also help you cut back on your impulse buying.

8. Stick to Your Limits

All methods of budgeting require strict self-discipline to avoid spending all your cash in one category very quickly. This also requires that you don’t use your cards or mobile money to cover any shortfall. It’s possible to borrow money between envelopes if you note overspending in a category like on your grocery budget two weeks into the month. But you will need to cut back on spending in other areas.

9. Review Your Categories after a While

Review your categories and make adjustments after following them for a few months. You might find that you seldom have sufficient money for groceries but you constantly have money left over in the “utilities” category. You will be able to minimise utilities and add on to “groceries”.


If you find yourself struggling with overspending, cash-only budgeting is a great way to help you conquer that habit.

Once the envelope is empty, you can’t get more money as this style requires you to leave your cards at home and steer clear of using mobile money to pay for anything outside the envelope.

However, carrying one of your cards strictly for emergencies is okay. Just ensure you are using it for a real emergency.

This style is also perfect for people who like to have control over their budget categories and how much money is allocated to each category.

One thing to be cautious about though: when you are dealing with cash, there is always a likelihood that you are going to lose it either by dropping the money or misplacing it.

NOTE: It is possible to have a modified version of the cash-only budget if you are too scared of the prospects of losing hard cash by taking the envelopes online. You can use an app to create virtual envelopes and divide the cash across categories. 

The app, or even a spreadsheet can be showing you all the balances for each ‘envelope’ while you pay using mobile money or cards. The point is to use your ‘envelopes’ as the guides to what you are purchasing

However, you will lose the psychological advantages that come from dealing with hard cash - in many ways spending virtual money is easier than hard cash, which invites overspending - and that is what you are trying to avoid using this system. 

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Eunniah is an experienced business writer and editor. She is also a published author with two titles under her belt; Breaking Down and If My Bones Could Speak. You can find Eunniah on Twitter @Eunnyversal

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