There are two ways to quickly solve your debts or improve your financial situation: make more money or curb your spending. While not everyone can suddenly start making more money, everyone can do something about their spending habits. One way to spend less and still survive is to go on a cash diet. This means using only cash the old-fashioned way to buy the items you need.
Here are some tips on how to put yourself on a cash diet:
- Leave your credit and debit cards at home: Now that you have decided to use only cash to buy groceries and other items, start by leaving your credit and debit cards at home. If you carry them with you, you will likely be tempted to use them. It will be difficult at first if you are used to paying with your credit card, but once you get use to using cash it will be a breeze.
- Carry just enough cash to buy what you need: Switching to cash only payments doesn’t automatically solve your problem. If you empty your bank account to stuff all your money in your wallet, you will soon find yourself spending more that you can afford. When going shopping, calculate the amount of money you will require, and withdraw just enough to purchase what you need. That way you will not be tempted to buy items that are outside of your budget. If you do, you won’t have enough cash left over to buy something that you truly need.
- Use the envelope approach: The success of your cash diet depends on how much you can save each month. At the beginning of each month, withdraw just enough cash to cover your expenses and divide it under headings like groceries, gas and entertainment. Put the cash for each category in a labeled envelope and make sure that you use the money only for that purpose. If you run out of cash in your grocery envelope, it means you either have to cut the budget for another category, or lower the budget for your groceries.
- Don’t forget your entertainment budget: When creating a budget, many of us forget to include a category for entertainment expenses. While the amount of cash you allot to this category shouldn’t be extravagant, try to budget for a few small treats to keep you motivated to stick to your all-cash diet.
- Keep it up: Once you’ve mastered the cash diet, try cutting back on your budget and find areas where you can spend less. Challenge yourself to live on a smaller budget, and use the extra money to pay down your debts or put into a savings account.
Starting a cash only diet can be challenging, but it can also be very rewarding as you begin to live within your means and really see where your money is going. Need more help paying down your debts? Contact Credit Counselling Services of Atlantic Canada to get started on a personalized debt management plan that fits your budget.