How to Live on Cash Alone
One of the best ways to avoid going into debt is to use cash for all your monthly expenditures. This means only spending the actual money that you have in your bank account or on hand. It means no credit cards, no cash advances, no overdraft account usage, and no borrowing of any type, including payday loans. The reason this method works is that you cannot spend money you don’t have. It will be impossible for you to overspend or to go into debt with this technique.
The main obstacle to a life of cash only living is that you’ll end up spending what you have stored in your bank account before you’ve paid your fixed monthly expenses (rent, utilities, etc.). To avoid this, it is best to create an ongoing budget for yourself
Here are six tips for living on cash:
#1: Have a Plan
If you’re going to live on cash only, it’s important that you have a plan. Otherwise, you’re going to run out of money before you meet all your financial obligations each month. If you don’t already have one prepared, sit down and write out a simple budget. Include everything that you spend money on, from your monthly expenses to day-to-day costs such as groceries and gas. Write down the estimated monthly costs for each category and then make sure you have enough cash on hand to afford everything. You might have to adjust this budget as you go along to make everything balance.
#2: Know There Will Be Exceptions
You will not be able to pay your phone bill or utility bill with cash. Some creditors will take cheques, but others will only take credit and debit. Since you cannot use credit under this plan you can use debit or Interac Transfer through your bank account (most banks offer this now). When you’re creating your budget, deduct these expenses from the overall budget. If you make an Interac Transfer payment for a service, bill or purchase make sure you track it.
#3: Keep Your Records Updated
When you’re using cash as a main form of payment, you will not have a record of your cash spending. You will need to keep a record of your spending by creating a spreadsheet on your computer, using an app on your phone, or simply writing it down. Do what works for you. There are dozens of excellent applications available for Apple iPhone or Google Android phones and for tablets. Some banking apps, such as the popular KOHO no-fee chequing account, will track your spending and display your budget for you in real time on-screen.
When using a debit card, ensure you log in to your bank account on your computer and review your monthly statements regularly. his will prove helpful for keeping track of what you spend your money on and the amounts you spent.
#4: Set Priorities
When you’re living on cash only, there will be times when you’ll need to prioritize one purchase over another. You might not have enough money in your budget to afford both items right now, so you’ll have to make the difficult choice of one purchase over another.
Learning to set priorities and recognizing that you’ll have to give up certain things so that you can stay on budget is an important financial skill to learn and benefit from. Living on cash helps you develop this skill quickly.
#5: Be Careful
Always be careful with your cash. Do not carry your entire monthly budget in cash with you in a wallet or purse. If you lose that money, it’s gone. You might want to carry only a few days’ worth of cash and leave the rest at home or in the bank. Better yet just use your debit card and keep your cash safe in your bank account.
#6: Put Some Money Aside
Having an emergency fund is always important, even when you are living on cash only. If a sudden expense comes up, or an expenditure turns out to be more expensive than you thought (such as an increase in utility costs, rent or groceries), having some extra money set aside for this situation can help you a lot.
It may not be possible to save a sizable chunk of money all at once but saving even a small amount each month can help and it will add up over time. I recommend putting aside anywhere from $25 to $50 per pay into a separate savings account where it’s waiting for you if you need to access it. You will be shocked at how quickly these tiny amounts grow in a brief period.
Remember to only dip into your emergency fund for actual emergencies if possible. Try not to use this special reserve fund to make up for regular budget shortfalls. But if you do find yourself regularly running out of money, that means it’s time to review your budget again and tweak it to reflect your true monthly expenditures and income. In fact, a good budget is one that is always being fine-tuned as your needs and circumstances change.
If you’ve been juggling a bunch of debt and find you need to get off credit temporarily and live the cash-only lifestyle, the insolvency professionals at Farber can help you. Please click below on the FREE CONSULTATION button or give us a call today so we can set up a free consultation for you and help you fine-tune your financial life. We look forward to helping you!