We Switched to an All-Cash Food Budget — Here’s How It’s Going

Setting — and sticking to! — a grocery budget is one of the hardest things I’ve done as an adult. And that says a lot, considering I’m raising two young kids. In January, after about three months of settling into a budgeting system that worked for us, my husband and I took things a step further and implemented an all-cash food budget.

Now, I’m not going to say that four months of cash spending has been life-changing or that it has been seamless, but I will say this: An all-cash food budget has changed how we shop for food, dine out, and make meal planning choices. And to date, this technique is the only thing that has constantly kept us under budget while we feed our family of four.

Here’s what happened when we switched to an all-cash food budget.

Cash budgeting goes by a few pseudonyms including the “Envelope System” or “Cash Envelope System.” The idea is that when you set your budget for a certain time period (some folks do monthly, others bi-weekly, or based on their pay schedule), you pull cash out for the categories you overspend in the most.

For us, groceries and dining out were our highest variable expenses each month. Some people who use this method also pull out cash for beauty purchases, clothing, and for entertaining, but being two busy parents who don’t really, say, go to the movies, we focused on food spending. So we created envelopes for weekly grocery shopping, monthly dining out, and later added an envelope for regular bulk shopping too.

The idea is simple: The money that’s in that envelope is the money you have for that time period. Spend it all on the first day and that’s it. It’s up to you to figure out how to make the cash last or how to make meals with what you’ve blown your cash on.

January was our very first month of an all-cash food budget. We set a grocery budget of $500 for the month ($125 a week) based on what we knew we’ve been spending over the past three months. We set a dining-out budget of $150 for the whole month — four pizza Fridays plus a few lunches out throughout the month. Our dining-out budget was the most ambitious (and our first failure), as we knew we typically spent about $300 a month on meals outside of the home.

Fueled by the success of an all-cash Christmas, we set a goal to eat through our pantry and freezer as much as possible in January. We were able to keep groceries considerably under-budget — like, spending just $75 several weeks in a row. But an impromptu visit from my mom ate through our restaurant budget during the very first weekend of January. Our first lesson in an all-cash budget: It’s a good idea to move leftover grocery money into the dining-out envelope.

For February and March, we kept things the same and didn’t make any changes. But we did make two logistical improvements. The first was not taking all our cash for the month out at once. After a small panic, during which I thought I had lost not one but two cash envelopes between grocery errands, we decided to pull just a week’s worth of grocery cash out at a time. Worth noting here, because this is a question I field a lot: Most people who use an all-cash budget DO NOT carry their cash around with them at all times. They keep their cash secure at home and only take specific envelopes out with them as needed.

Pulling out less cash at a time had a very niche impact on our budget too because, given my line of work, it helped to have some of my grocery budget in the bank when I needed to order spices or other specialty groceries online or to use a grocery shopping service on a busy weekend. It also meant we had to create a “cash-less” envelope to track our digital grocery spending.

The second adjustment we made to our all-cash food budget in February and March was to create a “Sinking Fund” envelope for bulk goods at Costco. A sinking fund is a short-term cash savings that you can create for things like holidays, vacations, or other larger expenses. Because we didn’t plan well for them in the beginning, a single bi-monthy Costco trip could easily wipe out our whole grocery budget for a week. Now when we underspend in a week, we add some of the leftover cash to our Costco envelope (usually between $10 to $15, but sometimes more) so that we have about a $100 every six weeks to spend on bulk purchases at Costco.

I’d love to tell you that we’ve somehow mastered our dining-out budget, but we still routinely overspend when it comes to dining out. We are parents to two young children and all four of us have widely varying schedules with work and after-school activities — which is all to say that we end up eating out when we’re too busy or just want to be social with other families. It’s hard to plan our dining-out schedule!

If you’re reading this with widening eyes thinking that an all-cash budget is a lot of work, I hate to confirm that it is. Some weekends I really don’t want to shop my pantry, meal plan, and diligently grocery shop — tracking my spending as I go through the store — but the tactile reward of tucking 200 extra dollars into a vacation fund or towards our mortgage every month keeps me motivated.

A cash budget works well for grocery spending not just because the physical transaction of handing over a hundred-dollar bill registers differently in your brain, but also because it encourages you to be focused on the details of your spending. Cash helps you make a lot of micro choices in the store with clarity. (Example: the generic cereal is a whole dollar less for the same product and that means I can buy my favorite local coffee instead!)

April is shaping up to be a very different month for our cash budget. Our local farmers market just opened up for the season and I haven’t figured out how that will factor into our envelopes (will it come straight out of groceries or does it need its own set of envelopes?). But just three months of watching my savings climb is enough to keep me trying — at least until we’re debt-free sometime in 2025.

Have you tried an all-cash grocery budget? Would you ever? Discuss in the comments below.