This is the last post in a series called the Cash-Only Challenge, in which I document my husband and I reluctantly giving up credit cards and using actual, physical cash for all of our purchases (imagine that!). We wrapped up the challenge a while ago, but I’m just now reporting back to you on how it all turned out. You may wish to first check out Part I, which explains how two die-hard credit card users ended up doing this Challenge, Part II, involving grocery budget shenanigans, Part III, describing the logistical acrobatics involved in using a cash budget system, Part IV, traveling with a cash budget, and Part V, which contains the details of our cash budgeting system.
We survived the Cash-Only Challenge!
It’s done: my husband and I completed our Cash-Only Challenge. For three long months, we paid for everything using cash- no credit cards were allowed, and we only used debit cards for paying bills online. There is no question that going “cash-only” for 3 months was not easy… I have an addiction to the convenience involved in using a credit card, and there were times when I wanted to abandon this Challenge with an effortless swipe of my Visa. Nonetheless, we stuck with it, through the emotional ups and downs of using cash and making it last each month with our cash budget system.
Now the three months are over and it’s time for me to report back on the ultimate question:
Is a Cash-Only Lifestyle worth it?
Well… there were positives and negatives for us. I’ll go through those first before revealing our answer.
Benefits of a Cash-Only Lifestyle:
- Protection from impulse spending. This is really big! Like all Americans, my husband and I are bombarded at every turn by enticements to buy things: advertisements on TV, in magazines, on websites, in email promotions, even arriving via push notifications to our iPhones. And like most Americans, we give in to the desire to shop on a regular basis- buying extra little things that fall more into the category of “wants” than “needs.” And all those little purchases add up, slowing down our progress towards financial goals that are really meaningful to us. When we went “cash-only,” our impulse spending was drastically reduced because we had to carefully conserve our money so that it would last us the whole month.
- Sticking to our monthly budget. If we didn’t have money for something, we didn’t (couldn’t) buy it. As a result, we didn’t overspend, and therefore we were able to meet certain savings goals, like transferring an extra $200/month to our retirement account.
- Satisfaction. It was tremendously satisfying to know that whatever large purchase we made (like buying a $250 trailer bike so that we could bike our daughter to Kindergarten) was fully paid for in advance, because we had saved up for it. I wasn’t used that feeling- I was used to the “hangover effect” of credit cards- that is, having my enjoyment of a purchase crimped by the knowledge that there was now an outstanding bill to pay. By contrast, it is amazingly liberating to hold a purchase in my hands and know that I don’t owe anyone any money for it- it’s mine and I earned it, end of story.
- Cash surplus. Because our monthly spending money was pre-set every month and divvied up among cash envelopes, there wasn’t any way to spend more than the cash that we had on hand. In other words, if there was $40 left in Groceries cash envelope during the last week of the month, we could spend only that $40. But what’s the likelihood that we’d find groceries that tallied up to exactly $40? Very low- our total would end up being $39.26, or some other amount close to $40, but not quite $40. So we were inevitably left with spare change at the end of every month- sometimes a few coins, but often a few dollars. It was fun to put that extra money in a jar each month, and watch the cash surplus add up.
Drawbacks of a Cash-Only Lifestyle
- Inconvenience. This really can’t be overstated. We live in a culture of convenience- smartphones are loaded with apps to make our lives as easy as possible, with turn-by-turn directions, birthday reminders, and electronic no-clip coupons served up to us with just a tap or two. The ease of using credit cards fits right into that culture- you just swipe and pay, and go on your way. No detour to the ATM, no time spent thinking about whether you have enough money in your account to cover a purchase, no frantic searching through your wallet to find that missing $20 bill.
- Time Spent on Planning. A cash-only lifestyle requires some thinking ahead- some planning as to how you will make your money last for the entire month. If you don’t plan ahead, you could find yourself spending your entire grocery allowance in the first two weeks of the month. In order to make the cash-only lifestyle work, I had to take time every month to review our budget, withdraw our monthly spending money from an ATM, and split it among various envelopes labeled with spending categories. If I made a purchase in a spending category online instead of in person, I had to use our debit card, which ended up complicating things. For example, if I bought a case of applesauce from Amazon for $20 with our debit card, then I’d have to remember to remove $20 of cash from the Groceries envelope and either deposit it back into our checking account, or make a note for myself to credit the money towards next month’s cash withdrawal for Groceries. For many busy parents, especially those that work outside the home, this extra time spent may feel like too much of a burden. If you’re already short on time, it’s hard to motivate yourself to use what little spare time you have on financial matters.
- Fiscal Anxiety. When I was shopping with a limited amount of cash, there’s a certain amount of anxiety that arose when it came time to make a purchase: “Will I have enough money to cover this? If I buy this, will I have enough money left over for other expenses this month? What if something unexpected happens and I need more money to cover it?” To some extent, these fiscal concerns are a necessary part of a cash-only lifestyle- if we didn’t have them, we’d end up spending all our money before the month is up. So in evaluating whether a cash-only lifestyle would be worth it to you, one of the questions would be, what is your level of comfort with this “fiscal anxiety”? Some people aren’t bothered by it- to them, stretching their cash to last the entire month is more like a game than a burden. To others, any amount of worrying over money will feel intolerable- like some kind of torturous exercise in living at poverty level, even if your income is quite high. I fell somewhere in the middle- I had occasional moments of panic as to whether I had overspent, but for the most part I felt comfortable doing the required mental tallying with every purchase
So, did we stick with a cash-only lifestyle after completing the Challenge?
After weighing the benefits and drawbacks, we realized that extra time and energy needed to manage a cash-only lifestyle was too much for us handle in this particular “season” of our lives. Between a pregnancy that was extremely difficult, various ongoing medical visits that take time out of our schedules, and the normal challenges of raising an infant plus an older sibling, we realized that we needed to choose convenience in at least some areas of our lives. We reverted back to using credit cards, although I should emphasize that we are very, very careful to budget our spending so that we always have enough money to pay our credit cards in full every month.
I think all of the arguments in favor of a cash-only lifestyle are completely valid, and I would wholeheartedly recommend a cash-only lifestyle to anyone who is trying to get out of debt and needs a rigorous and effective method to keep spending in check. I would also recommend it to those in less dire circumstances, who simply want to be more conscious about their spending. In fact, we may at some point return to a cash-only lifestyle, because I think it injects a level of intentionality into spending that cannot be achieved when using credit cards (even credit cards that are paid in full each month). But for now, our cash-only lifestyle remains a fond memory of a worthy exercise in personal finance.
Want more? In Part I: The Accidental Players, I explain how we wound up in this Cash-Only Challenge despite having no interest in a cash-only lifestyle. Part II: Grocery Budget Jitters describes how we weaned ourselves from credit cards and took the plunge into using cash. Part III: The Roller Coaster, tracks my logistical acrobatics (and occasional panicked moments) as I attempt to cover all of our month’s expenses before our cash runs out. In Part IV I report on taking our Cash-Only Challenge on vacation with us. Part V describes the cash-only budgeting method we used to keep our spending on track.
Interested in doing a Cash-Only Challenge yourself? Check out Crystal Paine’s book, “The Money Saving Mom’s Budget” (which I reviewed here) and learn all about it. In her trademark upbeat style, Paine lays out the blueprint for a cash-only lifestyle.