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How Can I Save Money by Using Cash?

When All the World's a Cash Bar — How to Go On a Cash-Only Budget

If you're looking at your budget and constantly thinking, "Where can I cut back?" and "How did I overspend again this month?" it might be time to try something new.

Budgeting is actually really tough. It's hard to give yourself a limitation on something and even harder when you want it and can't have it. That is why the cash-based diet eliminates your wishy-washy attitude on whether you can afford to spend. If you're struggling to manage your budget, it might be time to break up with your credit card and get together with cash. Here are the best practices for juggling life on a cash-based diet.

First things first: go back in your banking and find out what you've been spending each month.

This is the best way to figure out a realistic dollar amount to put toward each category of your budget. Once you've done that, write them down by hand. Yes, like it's 1999. Writing it down will make you more aware of the actual amounts you've been spending. I'd say if you go back three months, you'll be able to find a pretty solid average within those bills.

Secondly, it's time to see if you should cut anything down.

If you've been spending too much money on movies, cocktails, or data — be honest. It's a lot easier to cut down on things you have control over than, say, your rent-controlled apartment. Now, again, write down by hand your new and realistic numbers.

Third, hit the bank and take out your monthly allowance.

And no, that doesn't mean walking down the street to the 7-Eleven and using an ATM that'll cost you money. Hit your bank whenever you have time, and take out the total amount of money you'll need for each section of your budget.

Why monthly? Weekly or biweekly can become a pain to manage. By organizing your finances each month, you'll be able to create more consistent habits and a better balanced budget.

Need an example of how much that might be? Here's my small breakdown:

  • Groceries: $150
  • Gas: $60
  • Entertainment: $200
  • Date nights: $100

Lastly, put those into individual envelopes and keep them somewhere safe.

Now that your cash envelopes are filled up, it's time to give the diet a rightful go. Unlike your Paleo, Atkins, or vegan diets, though, there are no "cheat days" that no one will notice. Once you have spent that money, you don't get any more until the next month. If you decide to drop $100 of your date night budget on a steak dinner and bottle of wine, that might be your only date night this month — and that's OK.

Not yet convinced?

Most of the time, cash over credit is the simplest way to control your spending habits. Why? Cash hurts. Using credit or debit is the easiest way to avoid seeing how much money is left over and whether you can truly afford what you're about to buy.

On the other hand, if you must go into your grocery envelope and see that you only have $50 leftover for the month, you might be a little bit more conscious of how much you spend on that trip and become the frugal queen of every finance-lover's dream.

Remember to review your cash amounts required each month in case you're aware that you'll be spending more or less in certain areas over the next 30 days. For example, if you're traveling and won't spend as much on groceries and entertainment, take note. Put that money toward your trip or another savings goal.

Now, let's recap what you need to do:

  1. Review your spending and find the average spent within each section of your budget.
  2. Cut back in realistic areas of your budget.
  3. Take out enough cash to cover those expenses.
  4. Separate the cash into envelopes and monitor spending.

Only four steps! See? It's not that intimidating. Now get out there, try a cash-based diet, and start to take control of your money — finally.

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