Considering going all-cash for the month? Read this before you do.
At the beginning of July, I decided I needed to take a card-swiping hiatus. I'd just gotten back from vacation and had successfully paid off a too-high-for-comfort credit card bill, so I was ready to go card-free for a while.
I'm no stranger to the concept of all-cash diets, but as someone who favors cards, the idea has never excited me. However, I wanted to find a way to keep my credit card balance low and cut down on food and social spending in the month following my vacation, so restricting myself to cash seemed like a ready-made (and free) budget hack.
At the beginning of the month, I paid my rent and left all of my recurring bills (utilities, car payment, etc.) on my credit card. I then set boundaries for my experiment: I would only be using my $500 cash on groceries (food, toiletries, household goods, etc.), eating out, drinks and coffee out, and any unnecessary spending ("just because" shopping, for example). The only things I was allowed to use my credit card for were ride-sharing services (I left Uber and Lyft linked to my credit card, mainly because I trust myself not to overuse either) and the occasional exercise class. Other than that, the plan was to do absolutely no credit or debit card swiping. I withdrew the entire sum ($500) from my checking account at the beginning of the month, and made sure to put the cash in various places. These are the four lessons I learned during my $500 cash-only month:
1. Life in 2016 isn't conducive to a cash-only lifestyle.
My cash-only month reminded me that I don't lead a particularly cash-friendly life. Going out to dinner with two or three other friends inevitably means we put down three cards, or put in one and have the other two Venmo the third person. It slows everyone down to section off one-third of the bill for cash, but I also didn't feel comfortable volunteering someone else's credit card and then offering them cash. In the entire month, I spent about $70 on my debit card (and an additional $50 on Venmo) for the instances where I couldn't use cash to split a bill.
2. Setting boundaries was crucial.
If you're going to do a cash-only week or month, deciding what the cash will be used for in advance is a must. If you skip this step, you'll run into purchases or circumstances that fall into an uncategorized gray area, and might opt to just swipe instead of turning to your cash arsenal. Because I had decided that any unnecessary shopping would be taken out of my cash supply, the cash diet also ended up working as a defacto shopping ban.
3. Sticking to a set amount of cash functioned a lot like an offline budgeting app.
A lot of budgeting apps track how much you spend using a variety of different categories. Alternately, I tracked my spending based on how much cash I still had left. For me, there's a lot more incentive to regulate my spending when I see the cash disappearing before my eyes, rather than an app reprimanding me for impulsively eating out three times in one day. Instead of carrying around $500 in my wallet, I found it much easier to section the money off and put $120 in my wallet each week. Rationing $120 over seven days is, predictably, simpler than figuring out how to disperse $500 over 31 days. If I were to do it again, I wouldn't take all the money out at once, but would instead withdraw cash once a week.
4. I failed, but I still spent less than I otherwise would have.
I ran out of cash four days early. This was mostly because I didn't always stick to just giving myself $120 a week. Some weeks, I spent too quickly and would have to throw an extra $20 in my wallet, which meant going into the final week, I was down to $40 (and July being a long month didn't help). I called my diet quits four days early, which I'm sure anyone doing a month of Paleo can relate to. But even after coming up short and having to use my card a few times, I still spent much less than I ordinarily would have. Typically, I spend about $350–$400 a month on groceries, and $400 on "other" (going out for drinks, eating out, shopping, entertainment, etc.), bringing me to $750–$800. During my cash-only month, that number came down to $620.