How dumping your credit cards can keep you on budget…

…even if you’re a credit-card “deadbeat” who pays off all charges in full every month.

As I was saying yesterday, if and when my credit-card issuers try to sock me with annual fees just for carrying their plastic around in my purse, the cards will go away. Substituting cash, purchasing cards, and checks for credit cards will, on the surface, add an extra layer of complication to my bookkeeping: I’ll have to go to Costco and Safeway to buy the purchasing cards, and I’ll have to keep track of amounts spent with each of these spending tools.

Or so it seems.

In fact, though, I think a credit-card-free system might be no less involved to track than what I’m doing now: budgeting $1,200 (down from $1,500 after the furlough; an amount that will drop to $1,000 when my job ends) for all expenses other than monthly recurring charges (such as utilities), and staying on budget by trying to spend no more than 25% of that amount in any given week. To make this work, I have to enter each week’s bills against the week’s microbudget, a recurring Excel tedium.

Allocating a specific amount of monthly income to each of the three tools would work much like the “cash envelope” system favored by many frugalists. The idea is that you set aside a specific amount for each category in your budget—in cash, physically in an envelope—and when an envelope runs out of dollars, you have to stop spending on that category until you get more money. The psychological message is You’re out of money!!! Stop spending!

Well. A purchasing card with X amount of money on it is effectively the same thing as an envelope of cash. Run out of money—quit spending until you have more money. You could, in theory, regard the other two tools in exactly the same light: cash is easy; checks would be simple if you kept only enough money in your checking account to cover your monthly check-writing budget.

My plan is to have one purchasing card from Costco and one from Safeway, the merchants where I buy most of my food and household goods. Then to pay in cash for meals out, entertainment, and small incidentals, and to cover all other more-or-less discretionary expenses (such as house and pool maintenance, clothing, etc.) with checks.

In a way, this plan would be simpler than my present scheme. Instead of balancing all these expenses out of one “envelope” (the credit-card budget), each category would be strictly finite, and spending would have to stop when a given month’s limit was reached.

Right now I spend about $425 a month at Costco, about $68 a month for Costco gas (by far the cheapest source of gas in town), and about $80 a month at Safeway. Averaged out over the past nine months, I’ve spent about $48 a month on clothes at emporia other than Costco, my favorite purveyor of jeans and knit shirts; about $20 a month on haircuts; and about $68 a month on all pool care, including repair bills. Some of those costs aren’t going away after the job ends: I have to buy gas, for example. Others don’t happen every month—I get my hair styled about once every two months, and repairs on the pool happen only a couple times a year. Money set aside monthly for those categories would accrue until a need arose.

Regarded in this way, my base costs actually come to less than $1,000 a month:

Current predictable expenditures come to almost $870 a month. In the new, ascetic regime, regular expenditures (above and beyond monthly recurring costs such as utilities) will drop to around $815 or $820. Distributing these expenses among several payment tools, some of which (such as payment cards) are finite, might force me to stay within this restricted budget.

As a practical matter, of course other expenses will arise: veterinary bills and medical copays, for example, and the unending repair bills on the house. But those will just have to be paid from emergency savings, since Social Security plus teaching income won’t provide enough cash flow to cover such costs.

And also as a practical matter, some of these costs don’t happen every month: I rarely go out to eat, and when I do I certainly don’t spend fifty bucks. I don’t buy clothes often, and in any event, I obviously will have to cut expenditures there—I can’t afford to spend $600 a year on clothing.

I suppose I could take out the $190 a month—the amount to be spent by checks—for a total finite cash budget of $260. But I really dislike carrying cash around. It only took one theft from my purse to demonstrate that carrying cash is a fair way to lose it. That and the fact that cash runs through my fingers like water have always been my objection to the much-ballyhooed envelope system.

It’s an obvious idea: abandon the single, amorphous monthly credit-card budget and allocate costs to finite, tightly defined “envelopes” to be used for specific costs might limit total expenditures. The question is, with less flexibility can one stick to these straitened categories over time?