smart spending

5 low-tech ways to manage cash

"When a paycheck came, all the envelopes were filled with budgeted amounts except the credit card envelope, which was left empty," Joanna Burgess says. "If we were out and had forgotten to grab the cash for the intended purchase, we'd pay with a credit card. Then when we got home, (we'd) move the money from the intended envelope to the credit card envelope to symbolically say, 'This money is spent.'"

They've paid off $20,000 in school loans, saved a down payment for a home, set aside an emergency fund and attended a cousin's wedding in Hawaii. "For us, most of our entertainment is in eating out," Burgess says. "Having a limit on how many times per week we can eat out is where we see our biggest savings."

Savings: The Burgesses save $300 a month. Since they adopted the envelope system early in their marriage, it was tough to say how much they saved every month –- until they got slack and switched to plastic one month last year. "By spending on plastic instead of cash in March 2008, we overspent by $300, about 40 percent of our budget," she says. The Burgesses are back to the envelope system.

Expert evaluation: "I've never done it -- too many envelopes," Davis says. "But people I know who use it love it. They say they can see and feel the cash right there."

Cash or not?

For some people, spending only cash helps cut expenses because handing over those bills is more tangible than writing a check or swiping a card. But for others, ready cash in the wallet is more easily spent.

"I find when I have cash, I tend to spend it quicker," McGee says. He uses a debit card and leaves his credit cards at home for true emergencies.

For Davis, the amount of cash is key. If she has $20 in her wallet and gets thirsty on her walk, the temptation is to buy a bottle of water. When she has no cash, she can't spend it. On the other hand, for major purchases, Davis spends cash.

"When it's something like a $500 purchase, I want to see the cash and see that I have it in my account," she says. And for nonessential purchases such as clothing, the prospect of handing over $300 in cash for a nice jacket can deter spending. "That takes the glamour out of the purchase when I know I can probably get the same outfit somewhere else for much cheaper. Using cash sends up a red flag."

Expert evaluation: Your mileage may vary. Find what works for you.

Comparison shop

To further manage your grocery spending, start a price book or spreadsheet to track prices of items you regularly buy, an idea publicized widely by Amy Dacyczyn in "The Tightwad Gazette."

"People think they remember the price at the places they normally shop," says Jenn Fowler, who writes the blog Frugal Upstate. "But unless you're incredibly good with numbers, it's hard to carry all those prices in your head. Sometimes, when you're dealing with varying sizes, it's hard to know intuitively which is the better deal."

If one grocer in your area typically has lower everyday prices, use that store as a benchmark, Fowler says. Then when stores put items on sale, highlight the sale price, she says. You'll soon see patterns in how often certain items go on sale.

She advises saving your receipts and writing down prices when you get home. That's also a good time to do the math to figure cost per unit. "That way, you don't look like a grocery spy writing prices down in the store," Fowler says.

To get started, run a Google search for "grocery price book." Several Web sites have free Excel spreadsheets and/or PDFs you can use to create your own system. You can list items in alphabetical order, the order you find them in your favorite store or by categories.

Savings: Fifteen percent to 20 percent a month on your grocery bill, says Gary Foreman of TheDollarStretcher.com.

Expert Evaluation: "It's absolutely foolish to shop without a price book," Foreman says. "I was a purchasing manager, and we wouldn't dream of sending a professional buyer to buy something without having a buy history of what items cost. With a price book, you reduce your grocery bill without sacrificing brands, quality or quantity. You haven't affected what you consume at all."

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