Kick Start Your Debt Repayment with a Cash Only Diet
Cashless payments have become the norm for many of us.
Automatic payments take care of bills, while debit and credit cards, as well as mobile payments, allow us to shop without the need for cash.
You might look at your bank statements or credit card statements at the end of the month, and you’ve spent more money than you realised.
This is never great, but it can be especially worrying if you have debts to deal with.
Paying off debts is a top priority for many, but it’s difficult to do if you can’t control your spending.
Being able to see what you spend and where your money goes more clearly can be extremely beneficial if you’re trying to get a handle on your debts.
Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation
One of the techniques that you can consider is using a “cash-only diet.”
This means that you keep your spending in cash where possible, which helps you to budget your money and see your spending habits more clearly.
It doesn’t mean that you will pay for everything in cash, but it does mean you will use it for your everyday spending.
Starting a Cash-Only Diet
To start a cash-only diet, you first need to have a strong budget.
A budget will let you know where your money goes each month, and help you to determine how much cash you should be taking out to spend.
You need to know your income and how much you spend each month.
Your bills, card statements, and bank statements can help you to tally up how much you typically spend each month.
When you’re working out your expenditure, it’s also a good idea to think about the expenses that you have across the year.
You might not buy new clothes every month, but it still makes sense to account for them when you do buy them a few times a year.
You can divide annual expenses by 12 so that you can see how much you need to put aside for them each month.
Of course, it’s also important to take your debts into account.
You need to work out what you can afford to pay toward them each month after taking your other fixed expenses into account.
You need to make sure you’re not spending more than your income.
When you have a budget, you need to decide how you will use cash and what things might need to be paid for in other ways.
Many fixed expenses are better paid for with automatic payments.
They don’t change from month-to-month, so paying for them with cash wouldn’t really help, and it might not be possible anyway.
Automatic payments for your mortgage, car, bills, and debt repayments will take care of your fixed expenses.
You can then use cash for your discretionary spending, such as groceries.
Decide how much cash you need to withdraw each month to pay for these expenses.
Keep the money somewhere safe and take some with you when you go shopping, go out to lunch, get a coffee, or do anything else that you need to pay for in your daily life.
This will encourage you to spend your money carefully.
Once you’ve spent it, you have none left for the month.
However, if you have some left over from a previous month, you could carry it over into the next month.
You can also split up your cash into different categories so that you can budget it for each of the different things you need to spend your money on.
It can take a couple of months to get your budgeting right, but you can soon start to get a good picture of what you’re spending and how you might be able to save too.
The Benefits of a Cash-Only Diet
Using this method to control your spending and budget your money delivers a number of great benefits.
Working with physical money can make it easier for you to see what you’re spending and how you’re spending it.
It will teach you about your spending habits, how quickly you spend your money, and whether you might need to make any changes to your budget.
You might notice one area where you’re spending too much, or you could realise that your fixed expenses are too high, and you need to reduce them, so you have more money for groceries or other essentials.
When you can see clearly how much money you have left for the month, it’s easier to be a lot more careful about what you spend.
You can spread your money out more easily across the month, and you can see when your funds might be getting low.
This can help you to make better decisions about your spending and avoid wasting money on things that you don’t need.
How Long to Use Only Cash
It’s worth spending a substantial amount of time using this method of managing your money if you want to get the most from it.
A period of at least six months can give you some valuable insights into your spending, and it can help you to start chipping away at your debt.
You might even decide to stick with it until you have paid off your debt or a significant portion of it.
After a while, you might want to start using debit and credit cards again.
However, if you do this, make sure you’re tracking what you’re spending.
Keep your receipts and make a record of what you spend.
You can create a spreadsheet or use an expense tracking app that helps you to keep a note of everything that you spend.
Be sure to check your credit card statements and bank statements to double-check your spending too.
Start paying off your debt by getting a tight control over your spending.
You can quickly see the difference that a cash-only diet makes.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
How to File for Bankruptcy
What is Bankruptcy?
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?