I was helping a friend create a monthly budget last night, and when talking about how to allocate money for groceries, etc. she mentioned that at one point she used to put money on a gift card and use that for her general shopping needs. That had never occurred to me, but I thought it was a really great idea for those of us that like the convenience of having a card, but also need to stick to a budget for specific line items like grocery shopping.

Put your weekly/monthly/etc. budget on the card, and keep track of what you have remaining on your receipt. Probably a good idea to keep your last receipt in a specific place in your wallet/purse so you can quickly look at it to see how much you have remaining.

The downside would be that it pre-allocates your money to a specific store, but if you're like my friend and I, you tend to shop at the same place all the time unless there's a specific item you need that's only available elsewhere.

Another down side is that at the end of the month, if you've managed to spend less than your budget allows, it's stuck on the card. Around here anyway, you can't trade it in for money so you're basically handing your money over before you use it. You can't put the difference in your savings account or something.

One of the best things to do is to budget food items with cash and put it in a monthly envelope. What ever that amount is should be sufficient to take you through the month. People typically spend about 18% more in groceries if they use plastic. Determine what a monthly food bujdget should be and stick to it. Getting away from plastic is one of the best strategies for getting out of debt and building wealth.

I agree with the principle of the cash/envelope strategy but it doesn't work for me personally and I bet I am not the only one...

I live in the city and don't have a car. I do most of my grocery shopping on the way home from work, as the grocery store is right next to the public transportation station that I use to get home. And since I don't have a car I make multiple little shopping trips as needed instead of one big one once a week or once every two weeks. So, I never know exactly when I might be stopping at the store or how much money I will be spending. And if I want to use cash for groceries, I basically have to carry that cash with me all day, which feels a little risky.

If I get robbed of my credit cards, I don't lose anything. Charges will be refunded. If I get robbed of cash, it's gone forever.

This is the main reason why the cash/envelope system does not work for me. But like I said, i agree with the principle of knowing how much money you are allowed to spend per month on a certain category.

Everyone has good, valid points.

I want to point out that there is a happy medium in between. Use a debit card!

Debit cards are great since like credit cards, they are easy and very convenient to use. You can also monitor your spending with them. Also, you can use debit cards in pretty much any store, eliminating the prospect of your leftover funds getting "stuck" in a card. However, unlike credit cards, they do not allow you to borrow money, therefore eliminating pesky interest rates.

Debit cards are also great since paying with them is as good as paying cash. Also, you can have your debit card cut off if stolen, much like a credit card can.

Voila!

__________________
Adam Randall

http://www.fifteenyearplan.com - My personal finance blog dedicated to helping people take control of their finances.

Actually the rules are different. Your liability with a debit card can be much higher. It is also easy for a thief to drain your bank account if your debit card is stolen. You should get most of the money back eventually but it can take a while. That can't happen with a credit card. In my opinion the extra risk is a huge price to pay for lacking the self-discipline not to spend too much. The benefits of credit cards can be significant. The risks and drawbacks are almost entirely within your control.

why bump a 3 year old post?

That's how Mr[s]. FifteenYearPlan rollz.

What I do is budget an amount for the month. I budget my maximum amount and work from there.

Every time I purchase something, I keep the receipt and then put the amount into my excel file so that it deducts it from the budgeted amount. This helps because I purchase all my groceries with a credit card. As the month dwindles, I know how much I have left and what I will be able to pick-up. If I still have money to spend, I either don't spend it or apply the extra to an area I may have overspent for the month.

The debit card has disadvantages, as pointed out. But the alternative of getting a regular card I am more than weary of, seeing how these companies raise their rates and all the fees they charge, they are getting creative. Many in fine print. Before you compare, or go with a new card you might look at http://www.costhowmuch.com/mf/credit-card.htm.

I would suggest maintaining a card with a low balance to put a rein on the spending. Maybe the same card you use for internet purchases for safety.