We started doing this because we don't have a bank account, but it has turned into a great way to monitor our spending. Each week, I give my husband $40 to spend at his discretion, including going out for lunch near the office. I put another $40 in a green paperclip for the grocery budget. I put $20 in my wallet for my discretionary spending. I then put $40 in an interior pocket of my purse for our "entertainment" budget, which includes dining out, beer, and taxi rides for when my husband and I want to do something together. $140 a week for 4 weeks is $560 a month. Any money left over at the end of the week is not rolled over. That means that if we spent $20 on entertainment one week, we get $40 total for the second week, not $40 plus the $20.
Spending cash is a lot different from paying with plastic. You physically hand over the money and watch during the week as you have less and less green (and blue and red and purple in Chile) in your wallet. Before buying anything, you have to know that you have enough. Paying with credit cards makes tracking your spending difficult. They also make it possible to defer your payment, putting you in debt so that you can pay later. The points and 1% cash back doesn't add up to the savings that you earn when you force yourself to handle physical cash.
Our budget currently resets each Friday. This actually helps us keep under our entertainment budget. If I get a new budget on Monday, I am more willing to spend money over the weekend, knowing I'll get more soon. If I start the budget on the weekend, then I have to save enough money for the rest of the week. I am more conservative with my weekend spending, mostly reducing how much alcohol I drink.
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