After a pricey holiday season, I felt the need to buckle down in 2017. So I decided to limit my spending to $60 a week for eight weeks, starting January 1.
The $60 covers everything except fixed costs, meaning I'm having to commute, socialize, eat, and exercise on a tight budget … all while living in one of the most expensive cities in the world: New York.
I'm over halfway done with my challenge, and while it hasn't been easy or a lot of fun, I haven't wavered yet, thanks to one simple strategy: I'm going cash-only.
Trading in my plastic for paper has been incredibly effective, for a couple of reasons:
It adds another barrier between me and spending money
It's easy to mindlessly swipe a credit card and forget you even bought something. Try handing over physical bills and watching your money disappear right in front of your eyes. Chances are, you'll start to think longer and harder before making purchases.
It helps to have a specific savings goal. My last week on the cash diet happens to align with a pre-planned trip to New Orleans for Mardi Gras. While the trip's big costs are out of the way — I bought my flight in October and I'll be staying with a friend — stretching $60 over the four days I'm there could be tricky. That's why I set up a "Mardi Gras fund."
Every time I'm about to purchase something, I envision what that money could buy me in New Orleans. Those $5 lattes and $2 Vitamin Waters are much less tempting when I think about all the beignets that money could buy over the course of my trip.
I'm more in tune with exactly how much I'm spending
In general, I'm pretty good with knowing about how much money I'm spending, as I keep track of my daily purchases in an Excel spreadsheet. But on the cash diet, I always know exactly how much I have remaining in my budget — I simply open my wallet and count my bills.
It's also eye-opening to see how quickly my cash can disappear with what I always imagined were small, insignificant purchases. A few short cab rides and I've blown half my budget.
It forces me to stay on budget
I've always had a target number for how much I want to spend each week, but often, it's just that: A number that I hope to stick to. The temptation to spend, especially in a city like New York, coupled with unexpected expenses, makes it all too easy to go over.
The cash diet turns that abstract target number into something tangible: Physical cash that I can actually see and hold. It makes my budget real in a new way. After all, once my wallet is empty, I'm done spending for the week.
While I'm going cash-only for all of my expenses (besides fixed costs), another option is to just go cash only for areas you're trying to cut back on. For example, if you want to focus on trimming your grocery bill, determine how much you want to spend on food for the week or month and withdraw that amount of cash. When you head to the store, don't bring the plastic so you're not tempted to use it.
Want to cash diet with me? Evaluate your budget, pick an amount you want to spend each week, and head to an ATM today.