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How to Take the Cash-Only Challenge: Live without Plastic to Save Money

Take the cash only challenge from Money Saving Mom by cutting up your credit cards and paying bills with cashThe best way to get motivated to stick to your budget is to cut out all the plastic (even debit cards) for three months. Most people who take the Cash-Only Challenge save quite a bit of money. Learn how to get started with tips from The Money Saving Mom’s Budget by Crystal Paine.

1. Cut up, freeze, or otherwise completely remove your ability to use a credit or debit card for the next three months.

2. Make sure you’ve created a Full-fledged Budget. If not, do not try the Cash-Only Challenge. Download and print the free Full-Fledged Budget Worksheet.

3. Determine which categories from your Full-fledged Budget will be paid from your cash envelopes and which categories will be paid by direct withdrawal or check. Use cash for as many categories as you possibly can. Only use a check or automatic withdrawal for those categories that are a fixed rate or that you are never tempted to overspend in. If you’re paying bills online, choose the automatic withdrawal option that allows you to enter your checking account and bank routing numbers and then your payments will be automatically taken out of your account on a monthly basis.

Note: I do not recommend setting up automatic withdrawal on debt payments. Giving creditors unfettered access to your checking account can be dangerous as they may clean your account out to pay your debt. Instead, send a check or make a payment online that is authorized for a specific amount.

Calculate how much cash you need to withdraw on a monthly basis to fund each of your budget categories. If you get paid on a monthly basis, you’ll not need to worry about this as you’ll just divide up your paycheck according to what your specific budget categories are. But if you get paid every other week or weekly, you’ll want to know exactly how much of each paycheck should be set aside for each category so that it adds up to the monthly budgeted amount for that category. We have these biweekly amounts written next to each category in our budget.

4. Divide up your paycheck as soon as you receive it: immediately deposit enough money in your checking account to cover all the monthly expenses paid by check or automatic withdrawal and withdraw cash in the total amount needed for your cash envelopes and divvy it up between the cash envelopes.

5. Bring only your cash envelope and a calculator with you when you shop. When I am buying groceries, I make a grocery list based upon what’s on sale at the store and what I have on hand. I do a quick estimate ahead of time on how much my shopping list should total. I bring this amount plus a little extra to the store. (For us, that’s $5 to $10 extra.) You’ll want to decide what works for you. But remember that when the cash envelope money is gone, it’s gone. So use it wisely!

6. When shopping at the grocery store or another store where you’re making multiple purchases, calculate your purchases on the calculator as you add them to your cart. This will motivate you to evaluate all purchases carefully, make you aware of how much items actually cost, encourage you to look for the best deal, and prevent you from getting up to the register and having to put something back because your total is higher than what you have in your cash envelope. (Been there, done that and, believe me, it’s embarrassing!)

7. When making online purchases, use PayPal, a prepaid card, or a gift card. Some prepaid cards have fees attached to them, so I’d recommend paying through PayPal (linked directly to your bank account). Check the appropriate cash envelope that the purchase will be coming out of to make sure that you have enough money to cover it. If so, make the purchase through PayPal and deposit the money into the bank right away or else stick it in an envelope marked “To Deposit” which you can then deposit the next time you’re headed to the bank. (You’ll want to make sure you have enough in your account to cover the online purchase if you won’t be depositing the cash right away.)

It might seem like a hassle to refund the money to your bank account when you make an online purchase, but not only does this guarantee that you stick with your budget, it also encourages you to be more thoughtful about what you spend. Instead of just jumping on a good deal—without even thinking—because you’re afraid it might not be available for long, having to take the money out of your cash envelope and deposit it into your bank account forces you to think through whether it’s a good deal for you and whether it’s something you can really afford.

8. If you don’t spend all the money in a budget category or cash envelope during a month, don’t see that as license to go blow it on something else. Just save it and roll it over to the next month. It’s good to have wiggle room, and you never know if there’s a future expense in that category you’ll need it for. Most of the time, such as with the auto repairs category, we eventually need to use most of it, even if it sits and accumulates without being touched for months. It’s so reassuring to know that we have a budget category that is fully funded for auto repairs if the car breaks down or a tire blows.


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