Decisions, Decisions

I have downloaded a few awesome spreadsheets to help us plan our finances. (Thanks It's Your Money!)

Now I just need to choose one of the following ways to go about doing things.

1) The Envelope Method - Using Cash and Bill Pay

Using this method I would take out cash to cover the following: gas, groceries, household expenses, entertainment, and any other things we can physically pay cash for. I would use Bill Pay for our utilities and things that would be too difficult to pay cash for.

Pros: Once the cash is gone, it's gone.
Cons: I tend to spend cash way way way too easily and "forget" where/how I spent it.

2) The Envelope Method - Using Debit Cards and Bill Pay

Using this method I would use a spreadsheet (It's Your Money) to keep track of my "envelopes" though no actual cash would be withdrawn.

Pros: Once the cash is gone according to my spreadsheet, it's gone. Easier to manage.
Cons: Easy to "cheat" by spending more anyway; there's nothing to stop me.

3) The Cash Back Card Method

I have a Chase card that offers 3% cash back on a number of categories including gas and groceries. I could use this for our bills and pay it off immediately, thereby avoiding interest charges and getting additional money back.

Pros: It's like getting a discount on all my purchases.
Cons: So easy to buy more than I need, "pay it off next month" and so forth. Especially since the money will be sitting in our account. It will seem like we have more than we really do.

Each method has pros and cons. Each method is going to require will power.

I'm thinking about option 2. I'm not going to risk blowing cash on who knows what (seriously, it's a blind spot for me) and I'm not going to risk charging things and then not paying them off. (If I could charge things and then pay it off, why am I in debt? Oh yeah, cause I didn't have the money.) If I can stick with this method for four months, consistently, then I am going to try method #3. First time we "slip", however, it's back to method #2 and the card goes back into its ice-block in the freezer.

What method do you use?