For the last two months, I’ve been using cash to pay for the majority of my purchases. And yes, even the Trader Joe’s cashiers have laughed at my dedication to dolla dolla bills. But I think I’ll have the last laugh because, for first time in my life, I’m saving, avoiding dipping into my savings account, and hitting financial goals left and right, all thanks to my new cash-only diet.
I’m not exactly sure when inspiration hit, but I think I can approximately pinpoint it to when I was taking yet another depressing look at my school loans. They aren’t out of control, but it’s still overwhelming when you calculate how long it will take to pay them off at your current rate. After watching about a thousand Dave Ramsey-inspired YouTube videos and reading even more TFD articles, I made my decision: I was going to create a zero-based budget every two weeks in accordance with my paycheck, and the majority of my spending would now be in cash. (A zero-based budget, as defined by Investopedia, is “a method of budgeting in which all expenses must be justified for each new period.” It starts from a “zero-base” and each expense is analyzed for its needs and costs.)
It’s been an experimental and insanely productive two months. I paid off the smallest of student loan balances (don’t worry, I still have two huge ones left), hit $1,000 in my savings account (emergency fund, here I come!), and I have never been less reliant credit cards. Although my system may not work for everyone because cash can be super inconvenient, I still feel like I’ve learned some valuable lessons that can help anyone starting out on their wobbly budgeting legs. Here’s what happened during the first two months of my all-cash diet:
1. I finally had my “oh, that’s where my money is going” realization.
The first thing I did after deciding to take control of my finances was print out my checking account statements. After printing them out, the highlighting began. I picked out categories: food, entertainment, personal/household items etc. Let me tell you, this was a major eye-opener. I was more shocked by the frequency at which I spent, than the amounts I was spending. Whole Foods and CVS were major offenders. Working right down the street from a Whole Foods, and routinely taking therapeutic strolls around CVS were sucking up a lot of my cash, and I’d simply had no idea — and nothing to show for it. It was a life-changer to see these habits staring back at me.
2. I realized that, if I budget wisely, I can afford more than I thought.
Over the last couple of years, I have been battling a moderate case of adult acne. It’s been a major hit to my self-confidence, but I began seeking treatment a year ago, and it’s now mostly under control. Part of my treatment plan involves seeing a homeopathic doctor (not covered by health insurance) and going for a deep-cleansing facial once a month. These two things aren’t cheap. The doctor’s appointments and facials each cost me about $150-$175. Before I moved to my all-cash system, I just swiped my credit card to pay for these treatments and paid off my credit card later. After creating my budget, I was shocked to learn that I could actually afford to pay cash for these things up-front, as long as I saved the money for it. There is something about things costing more than $100 that made me think, “WHOA, can’t afford that!” But, in reality, the money is there, and I just have to set it aside when I get my paycheck.
3. My bank became my best friend.
Every payday, I walk into my bank and withdraw the cash I need to cover all my expenses for the next two weeks, including my saving goals. Yes, I actually interact with real humans at the bank rather than just pushing some buttons at an ATM. I do this because I need specific denominations, but the experience of walking into the bank every two weeks also helps me financially. It’s personalized the whole processes — I feel a certain accountability now that I know the tellers at the bank. And it encourages me to ask questions I’ve been putting off: I was able to switch to a credit card with no interest for a year, and a much lower interest rate than the card I was using. I would not have known about this card if I weren’t regularly going to the bank. Also, free Jolly Ranchers are a major plus!
4. I started figuring out my financial priorities.
By far the toughest part of moving to my cash-only system was saying “no” to things. I would be nothing without my friends, but having friends ain’t cheap. There are drinks, brunches, and uber rides after the drinks and the brunches. Socializing is a priority for me, so I do set money aside for this, but saving money is my top priority. Being honest with yourself about how much you want to spend per week on activities is the first step; this helped me set an honest budget that doesn’t make me feel like I am depriving myself. It’s okay to be honest with your friends. You can gently say “no” and cite saving money as the reason. We’re all adults here.
5. I started keeping a to-do list for purchases.
Keeping a running list on my phone of things I need or want to buy has really helped me stick to my budget. I find that using cash requires planning ahead of time, so I don’t run myself out of cash. Maintaining my list forces me to know what beauty products, cleaning products, or even clothing items I need to replace. Being able to refer to my list means I can set a budget for the week that will allow me to make the necessary purchases.
6. I still put money aside to treat myself.
Saving up for fun things is the best! If you attempt this challenge, I think it’s totally okay to make a cash category for a new purse or a trip to the record store. Maybe it’s just me, but I’ve gotten such a thrill using cash for the fun things. I used to throw a lot of these purchases on my credit card, but paying cash instead has added more value to these expenses. Saving up in cash also means waiting until you can afford the purchase up-front, which is a great exercise in self-discipline.
7. I realized some of my past mistakes, and started to remedy them.
This is horrible, but my previous approach to credit cards was “Oh, this is Monopoly money.” I am weaning myself off of this view. And though, fortunately, I’ve never had any crazy amount of credit card debt even with this view, there have still been more than a few times I’ve swiped because YOLO: the hangover-deserved pad thai, a spontaneous trip to the restaurant that never has open reservations, etc. I’m not ashamed of these mistakes, but I’m glad that I’m improving my budget and that I’m in control of my finances for the first time in a long time. My all-cash diet is still going strong, my savings is growing, and I’m still learning from this whole experience.
Janessa Jackson is yet another 20-something that spends too much time watching Netflix. She is currently binging The X Files. You can find her sometimes funny tweets here.
Image via Flickr