If you really want to get your finances in order, you might want to consider going on an all-cash diet.
The beginning of the year is all about change and resolving to make better decisions than you have in the past. Some people cut out soda, chips, chocolate, or other unhealthy consumption habits to try to lose weight in the New Year.
But others are smarter—they set out to get their finances in order.
It’s easy enough to say that you’re going to save more, pay off your debt, and keep better track of your finances. It’s far more difficult to stick with the budget or find the right plan that works for you. There are plenty of budgeting and expense-tracking apps out there if you don’t need much to set you on your feet. But what if you need a little more help?
On LearnVest, three people explained how they paid off tens of thousands of dollars of debt (student loans, credit card, etc.) and still managed to add to their savings by going on an all-cash diet. For some pharmacists who can’t imagine a day when they won’t still be paying off their student loans, this might be just be the right financial plan to follow for the first year or two out of school.
The beauty of the all-cash plan is that the rules are incredibly simple. Just as with a conventional food diet, if there’s wiggle room, then you might justify breaking the rules just a little, just this once, and before you know it, you are never following them.
To follow the all-cash diet, all you need to do is set aside your credit cards and only purchase items with the cash you have on hand. Sounds simple, but you’ll find that counting out eight 20-dollar bills to buy a coat is a little more painful than just handing over the plastic. It might even make you rethink whether or not you really need to make that purchase.
Every time you go to the bank to withdraw more money, you’ll be reminded of just how much you’re spending. If you go out with friends and only have $40 in your pocket, you might be that much less likely to pay for the next round of drinks. If you go to the grocery store with just $75 on hand, then you’ll be limited to purchasing the $75 worth of food that you really need and might have to hold off on that box of donuts from the bakery section.
One of the people in the LearnVest article explained how at the beginning of every month, he budgeted a specific amount of money for expenses and set it aside in envelopes. When the entertainment envelope was empty, that meant no more movies for the month.
And once you’re back on track, you can kick the all-cash diet to the curb and take a vacation, buy a house, or simply tell your friends the next round is on you.