By Master Financial Education Volunteer Lenny Gonzalez
In January 2014 we decided we needed to get our spending under control. After talking to friends and family and researching some of their suggestions, we decided to go on the all cash diet.
What is the all cash diet?
It’s a spending tool that asks you to make the bulk (80 percent) of your purchases with cash instead of a credit card or debit card. It’s a great way to understand where you’re money is going each week or month. All you need to get started is:
- A marker – to write with
- An envelope – to hold your cash
- A piece of paper – in each envelope to keep record of the money you spend
To get started we listed the major items we spend money on each month:
- Metro (bus and rail)
- Pet Supplies
- Petty Cash
After we listed these categories, we labeled six envelopes and added the amount of money we thought we spend on a monthly basis on each category. Then each time we would buy something (grocery store, pet store) from the category we would take the money out, document the date and total dollar figure, make the purchase and return the extra money to envelope.
Here’s an Example:
Groceries – starting balance is $450 (two people avg. $110 a week).
- The first week we take out $110.
- We spend $90 at the store.
- We add the unspent $20 back to the envelope, leaving us with a balance of $360.
If we continue to save $20 dollars each week we can save a total of $80 a month!
As we save money we simply roll the extra money over to the next month building up a surplus that can help in the event we have an emergency.
The all cash diet is the only diet where gaining is a good thing! Give it a try and watch your money grow!