Tips to Live a Cash-Only Life


If you need help fixing your spending habits, nothing beats a cash-only lifestyle. Forcing you to set a definitive limit on the amount of money you can spend, this budgeting strategy is a great way to move toward debt-free living.

But being debt free isn’t the only benefit that comes with relying only on cash.  Lauren Greutman, a budget blogger and author of “The Recovering Spender,” said going cash only can also help couples communicate about money as they develop common goals and work to reduce debt. And in time, your spending habits will change. You’ll become a more conscious spender, resist impulse buying and spend your paycheck on what you need instead of what you want.

If you who want to avoid racking up credit card debt and become a savvier shopper, consider the cash-only method. Use these tips to live a cash-only life, and get better with your money.

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1. Leave Your Bank Cards at Home

The first step toward living a cash-only life is to only carry cash on you. That means leaving your credit cards and debit cards at home or in your safety deposit box when you go shopping.

“When I say cash only, I mean cash — the physical, green stuff,” said Greutman. “I don’t allow myself to even consider using credit for groceries or sundries, my weak spots. Cash keeps me honest.”

However, this doesn’t mean you shouldn’t own any bank cards, since they can be useful in emergencies. But keeping them out of your wallet more often forces you to stick with cash and acknowledge how much you’re spending.

“It’s just too easy to overspend with a bank card,” said Greutman. “When I walk around with a bank card, I tend to use it a lot — coffee drinks here, a snack there. Each purchase may be small, but they add up fast.”

Consider the following example: Your clothing budget is $100 a month, but the items you picked at your favorite store total $150 at checkout. If you only have cash on you, you have to put $50 worth of clothes back on the racks. But with a credit card, you’ll likely overlook this small amount and go over budget and develop bad spending habits.

Keep this in mind the next time you shop, and separate yourself from credit cards one day at a time.

See: 10 Things You Should Never Put on a Credit Card

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2. Assess Your Current Spending

Greutman also recommended that anyone considering a cash-only lifestyle should evaluate their spending habits to get a baseline for starting the cash-only system. Once you have a clear idea of how much money you spend, converting to cash becomes easier.

“Taking baby steps is the way to get into cash only,” she said. “Figure out how much you are spending now, and start there with cash only.”

Divide your expenses into categories — clothes, entertainment, groceries, etc. — and determine how much of your paycheck you usually spend on each category. If you don’t know, track your current spending for a month by keeping a notebook on hand when you shop. Also, save your receipts and see where your money goes. Pay particular attention to the categories where you tend to overspend.

This gives you a realistic starting point when figuring out how to live cash only. Allocate yourself the amount you currently spend, and set aside that much cash. Once you get used to the cash-only system, shrink those allocated amounts and save more money.

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3. Try the Dave Ramsey Envelope Method

This budgeting strategy, popularized by Dave Ramsey, is a handy way to adopt a cash-only life. And you don’t need a lot of cash on hand to get started with the envelope method. Just begin when you get paid.

As soon as you get your paycheck, set aside enough cash to cover your expenses. Figure out your spending categories — groceries, gasoline, meals out, entertainment, etc. — and create a separate envelope for each. Write the category title on the envelope in large letters. Then, put the amount of cash you need for each category into its corresponding envelope.

For example, if you want to allocate $200 toward your food budget, take $200 from your paycheck and put it in an envelope marked “groceries.” If your gasoline budget is $100, take $100 from your paycheck and insert it in the envelope labeled “gas.”   

When an envelope is running low, make do with what you have until you get paid again. No money can be transferred from one envelope to another — you have to wait until your next paycheck comes in before you can refill each envelope.

“Cash doesn’t offer overdraft protection,” said Greutman. “When the grocery envelope is empty, you eat leftovers.”

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4. Use Cash-Only Budgeting Apps

If the idea of the envelope system appeals to you, but you aren’t sure if using envelopes is practical, you have options. Several apps allow you to duplicate the envelope system.

One app that Greutman recommended is the ProActive budget app. It offers a digital cash-only envelope system. With the physical envelope method, you open your bag, select an envelope and remove the cash. The app works the same way: you open the app, tap an envelope, and then swipe.

“This is a cool app that works well when more than one person in the family is doing the shopping,” she said. “You are not tied to a physical envelope, so either person can pick up needed items on the way home from work.”

See: 12 Best Budget Apps to Help You Save Money

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5. Spend Less Than What You Earn

Most people who use cash only hope to control spending and live within their means. To make a cash-only lifestyle work, you — and your spouse or significant other — must commit to spending less than you make.

But it’s harder than it sounds. If you don’t create a budget, it’s easy to overspend without realizing it.

Identifying the difference between what you need and what you want is a good starting point for creating a budget. For example, food on the table is a need, the latest smartphone is a want. Then, “use any tricks that work to keep yourselves on track,” said Greutman. Some budgeting tips she recommends include:

  • Make a list before shopping.
  • Take a pocket calculator when you shop to keep tabs on your total before checkout.
  • Have an emergency cash fund so you won’t be thrown off if unexpected expenses come up.

When you spend less than you make, cash-only budgeting becomes possible.

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6. Dig Yourself Out of Debt

On top of spending less money than you earn, you should also take steps to eliminate debt. Getting rid of those monthly credit card payments will make cash-only living easier.

“If you don’t absolutely commit to paying off debt, you are certain to fail,” said Greutman.

Of course, trying to rid yourself of mortgage or auto loan debt in a short amount of time is difficult. Instead, arrange monthly bank transfers to cover payments on these loans, and take comfort in the fact that timely payments help your credit rating. And, focus your debt elimination efforts on consumer debt, such as credit card debt.

Set aside a separate cash-only envelope for paying down your credit cards every month — and don’t add new charges. It won’t be long until you become debt free and can use that cash for something else.

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