Thursday, September 12, 2013

The Cash Challenge

In this modern world of debit and credit cards (not to mention online shopping!) - paying with cash has kind of become taboo.  I've even noticed in line at the grocery store people huffing because the person in front of them is paying with cash and it takes longer, cashier has to verify and give change, etc.  BUT - can you SAVE money if you just use cash?

Honestly, you could probably stop reading right here and have your answer.  YES, I could save money if I only used cash.  Why?  Well (a) I can't buy anything on the internet using cash and (b) when I'm forced to actually hand over my hard earned money, I think about the transaction a bit more than when I swipe my debit card.  And all of us know swiping our credit card equates to spending money that was never really ours in the first place.  Turns out there have been studies that show we're willing to spend a lot more when we use our cards versus cash - up to 100% more!

So what is the cash challenge?  Roughly analyze your spending habits (or what you "think" they are) and at the beginning of the month take out that amount of money from an ATM in cash.  For example, if you spend $500 a month (not including things like mortgage, utilities or other bills you pay online) then take our $500 in cash.  Now here comes the trick - you have to make this amount last for the month.  At the gas station, out to dinner, at the grocery store, for daily lunch or coffee ... all of that extra discretionary spending.  Do you think you'd make it to the end of the month?

Personally, I know I would not.  I have a love for and all other sorts of online shopping.  However, it is a goal of mine to save to contribute towards household projects so I am going to propose the cash challenge to my husband for October.  As a side note, I actually do track all of our spending in Quickbooks software and break it down by category (hey, I'm a type A accountant - don't judge) so I will be super anal about collecting receipts during this process.

How the challenge actually works:

  • Take out your monthly discretionary spending amount at the beginning of the month and put it in an envelope in your desk drawer or some other safe space.  Also place a pen & notebook nearby.
  • Everyday (or however often you need to), take out an amount of cash.  Use the notebook as a type of check register - write down the beginning balance (ex: $500) and how much you took out.  For extra information (to see how bad your spending habits really are) write down what you intend to use the money for - then at the end of the day, revisit the notebook and write down what you REALLY spent the money on.
  • See if you make it until the end of the month.
Not only will this help have more respect for your money - if you're really hoping to save, this is a great first step because it will show you your money may not go as far as you think it does (especially if you've been supplementing your spending with credit).

Give it a try - then come back here and let me know how it went for you.  Or if you've already tried the cash challenge, how did it work for you and what did you learn?


  1. I haven't tried the cash challenge, but my hubbie takes all the money out of his bank account when he gets paid any way.

  2. This is a great tip! I will have to try it myself. Thank you!

  3. EEK I don't think I'd make it! You are right! Its a lot harder to hand over cash then it is to swipe! I'm gonna try one of these days!

  4. I think this is a great idea and I do this some months. We all spend way too much money and need to think about our future and learn to save!!

  5. I've tried this before and caught how quickly I spend money. Made me think twice before making a visit to H&M or going out with friends to the movies.

  6. I've thought about doing this. I think I would spend less! I'd probably buy less frappucinos anyway!