...there is an easy way to pay cash and track expenses in Quicken more specifically than just a catchall "cash" category. For categories I use every month, I use the "envelope system" ....and record the ATM withdrawal as a "split" transaction in Quicken.(snip).
To each their own of course, but I shudder thinking about the envelope method!
It sounds harder than using a credit card and just copy/pasting transactions...
Then it sounds harder than it really is. I only have five envelopes—groceries, gas, food at work, cat costs, and miscellaneous. The last three of those usually only get used once a month, and I could probably use my debit card for those categories without overspending.
I'm curious how this is implemented. For example, food at work - if you run out to lunch with coworkers and spend $7 on lunch, when do you take the money out of the envelope? Do you follow strict rules about envelope management? As in you forget to grab $40 for groceries from the proper envelope in the morning and you had planned to stop by the store on the way home. Do you still stop by and spend the $40, and then just reimburse your pocket cash from the grocery envelope?
I don't mean to be patronizing, I'm just curious how this system is implemented in practice. Maybe I really am not understanding the simplicity of the system. It just seems somewhat more complicated than using a single credit/debit card (or three). Is the motivation primarily emotional spending control that you would lose with a bottomless CC?
To answer your questions one by one, for everything but gas, I take the money out of the envelope when somebody says to me, "that'll be $4.95 please". For gas, I take the money out first and say, "I'd like $15 on pump number four, please".
I am not terribly strict about envelope management. I don't use paper envelopes, I have some little pouches that I use for each category, but any sort of change purse would work. Generally speaking, I carry the "lunch" pouch in my pants pocket, and the "gas" and "cat costs" ones live inside the console in my car. I have two pouches for "groceries" and two for "misc". One of each lives in my tote bag that I carry practically everywhere, and the others live in the car. So only rarely do I find myself somewhere without the right envelope, but if I do, I have been known to "rob Peter to pay Paul". Usually I reimburse when I get home, but if it's close to the end of the month I may just say "what the heck".
My motivation for using the envelope system is to test-drive my pension. I've tried to estimate my expenses, but I think the best way to see how much money you need is to pick out an amount and try living on it. The budget amounts are based on the pension I would have been eligible for if I had retired last year. My original plan was to use "this year's" pension every year, but due to budget cuts, City employees have ten days off without pay this year, so after maxing my retirement savings I don't have enough money left to spend based on the pension I would have received this year. So, I am accomplishing two things: I give a real-world test to living on my pension, and I make sure I don't short my retirement savings. But I think this method would work for anyone who for any reason needs or wants to keep within a definite budget.
and I wouldn't get the random cashback rewards check of $50-250.
True, you wouldn't. I don't use credit cards and haven't for years, so this is a non-issue for me.
This is something that perplexes me. Why not take advantage of a free 1-5% of everything you spend, the consumer protections of anti-fraud, chargebacks for consumer disputes with a merchant, plus a month or two of interest free loans in the meantime? I assume you could incorporate credit card usage with envelopes by immediately transferring money from the proper envelope to a sixth envelope labeled "credit card bill". That way you know to stop using the CC if you deplete a particular envelope's funds.
I don't use credit cards for two reasons. The first is I just don't trust the credit industry. I remember years ago when I was unemployed for over two years during the early 80's recession, I was taking home less than $700 a month (unemployment benefit, temporary assignments when I could get them, and later a part time job in a fabric store) Paying $250 in rent and $117 on a car. And all that time I was still getting credit card offers in the mail. My thought at the time was "if you want to loan me money in the lousy financial shape I'm in, you've got to be out of your ever-lovin' mind!" Ever since then I have thought there's something fishy about the whole business. That was before I ever heard about people being bled white with credit card debt, raising interest rates retroactively and all the other scummy practices of the industry. Thank God I have never been there! The only thing I've
ever owed five figures on is my house, and that's the only thing I've owed
any money for more than fifteen years—probably twenty (though I did refinance the house to replace my car in 2006). I got caught with about $400 on my credit card when I got laid off, and it stayed there for years. It was as much as I could do, and sometimes more than I could do, just to make the minimum payments. Later, when I finally found a job, I got a big tax refund one year and was wondering what to do with the money....should I invest it, or what? (this was long before I had any ideas about ER) Then I thought of paying off my credit card. That's what I did, and you could say I've been making 18% on that tax refund ever since. My opinion is, credit cards are a rigged game, played with a stacked deck against a crooked dealer, and I'm not going there. I'm really looking forward to being retired and totally debt-free for the rest of my life. YMMV.
The other reason is, I know myself, and based on that knowledge I am pretty sure that eventually I would be late on a payment and get hit with the high interest, punitive fees etc. Then I would be mad at myself for being so dumb
Plus, I'd have to pay the credit card company a bunch of money I'd rather spend on something else, and likely as not wipe out any rewards I might have gotten before I messed up. I'm just not interested.