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Tips to Live a Cash-Only Life

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To fix 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 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.

Click through to see everyday money skills you never learned in school.

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Credit and Debit Cards

The first step toward living a cash-only life is an obvious one: Make sure you’re only carrying cash. That means taking your debit cards out of your wallet and leaving them at home or in your safety deposit box when you go shopping.

But this doesn’t mean you shouldn’t own any bank cards — 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.

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Although you might be tempted to use your credit card for small purchases, Greutman underscores the importance of truly using cash only to make all purchases.

“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.”

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, 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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Man calculating bills in home office

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.”

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Resized negative-space-woman-writing-notepad

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.

Doing 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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Groceries Envelope

The envelope method budgeting strategy popularized by money expert 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.

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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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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Most people who only use cash hope to control spending and live within their means. To make a cash-only lifestyle work, you 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.

Cut These: Dumb Expenses You Need to Slash From Your Budget Now

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Create a Budget

Even if Dave Ramsey’s budgeting method doesn’t fit your financial situation or style, having any kind of budget is crucial if you want to live a cash-only lifestyle. Without the luxury of charging purchases to your credit card whenever you’re strapped for actual cash, you have to be more pragmatic about handling your money than you might be otherwise.

One of the real benefits of budgeting is that it not only helps you save money, but it also helps you maintain a balance between your income and your spending.

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Make a Life Goals List

Identifying the difference between what you need and what you want is a good way to help you stay within your budget and not overspend. 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.
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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.

Click through to see if cash or credit is better.

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