Living Debt Free

The keys to living debt free are planning, budgeting, and smart shopping.

Have you ever added up how much money you spend daily or thought about how much of your spending is on impulse?  Impulse spending is buying something you didn’t plan to buy until you saw it.  Grocery stores are notorious for inciting impulse shopping.  Why do you think the candy and magazines are shelved in the check-out lines?  Think about how often you spend money without planning and get ready for a surprise.  A typical day for most people includes some, all, or more of the following:

Coffee  $3.00

Newspaper or magazine   $2.00

Snack from vending machine  $2.00

Lunch   $9.00

Afternoon snack or beverage  $3.00

Spending $20/day M-F costs $5,200 a year and spending $10/day M-F costs $2600/year.  Breaking it down allows you to see where you money is going and often provides the incentive to change.

Most impulse buying is done on plastic – credit or debit cards – as most people don’t even carry cash.  Spend now – Pay later (over time and at high interest rates) has become a part of life.   Plastic money desensitizes us to what we are spending and leads to more debt and less savings.  More credit is bad credit if you can’t make the minimum monthly payment and you want to get out of debt.  One way to break this cycle is to live on cash.  Living on cash saves money and eliminates credit card debt.

Planning Purchases

We all want what we want when we want it.  Living on cash means buying what you want when you can pay cash for it.  Yes, someone else may buy the red sweater you spied on your lunch hour, but you might also decide you don’t want or need another red sweater.   Leaving plastic money at home encourages planning.  Living on cash forces you to be a better shopper and to make your money go further.  Living on plastic encourages spending impulsively and spending beyond your means.

How to Make Living on Cash Work

The first step to living on cash is to develop a realistic budget.  If you spend all your cash before your next paycheck you are setting yourself up for failure.  Determine and set aside money for your expenses and allocate a set amount for spending.  Make sure to drill down your spending money by day or week so you don’t run short.   Take just enough money for each day and leave the rest at home.  You won’t be tempted to ‘cheat’ and you won’t have to carry a lot of cash.

What about emergencies?  This is the most common question people ask.  According to a recent ACNielsen survey, Americans are among the world’s most cash-strapped people.  Most people have little or no savings and rely on credit in emergencies. Saving for a rainy day provides the means to pay cash for something you would normally charge. If you don’t save, start. Even a small amount over time adds up.  If your employer offers direct deposit, sign up.  If not, allocate a set amount from each check for savings and ‘pay’ yourself first.

Living on cash is challenging.  Set a goal and put it in writing. The stronger the goal and the better the plan, the greater the chance is for success.  Do you want to buy a new television or the iPad?  Cut out a picture of what you want to buy, determine when you want it, and how you will save the money to get it.

Take the Plunge

Never say never and you’re never too old to try something new.  If you can’t see yourself living on cash for the entire month, try one day.  Pay attention to all the things you want to buy, but don’t.  Don’t give up.  It is hard and it does take getting used to.  Anything worthwhile is.

If you live on cash or have any tips and suggestions for living debt free, please leave a comment.

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