I have long preferred the simple swipe of plastic to handing over warm bills. (Doesn’t everyone?) Paying for things in cash is physically painful. As it should be.
When others have asked, my excuse for avoiding cash transactions has been that using a card means it’s trackable, so I can better account for my spending when I leave a digital footprint. But have I actually tracked my spending? Nope. Sure, I like having the option. But if my money were a dog, it’s been off the leash for a while.
So last month, I decided to try the cash challenge. I took out $500 at the start of the month for discretionary spending (meaning rent, insurance and other recurring expenses were excluded) and vowed to try not to spend a cent more. I was actually excited about it. At last! Getting real about money. I’ve been dodgy and defensive about my spending for a while. This was going to keep me honest.
Mine was a very low-tech approach: I took the wad of cash and stuffed it in a business envelope and put it in my desk. I wrote down what I was taking money out for and then what I actually spent it on. (Money as provision rather than an on-demand resource. What a concept!)
The first thing I realized is that I’m a very bad judge at predicting what I might spend. Forty bucks disappeared like water (or wine) during an evening out. A friend’s birthday dinner should have cost me no more than $60. But I threw in an extra $20 to help cover the tip when the group’s contributions came up short. Ouch.
My errands also felt noticeably different. Why? Because now when I needed something, I walked into a store, found the item, bought it and left, rather than linger in the aisles looking for other things I might “need.” (Ooh! Face scrub!) No more spending as a diversion for the delicious hit to the pleasure center of my brain it can provide--at least initially. What the cash game does is make it more fun to try and hold onto your money instead.
(It should come as no surprise that researchers have found we’re willing to spend a lot more when we use a card instead of cash--up to 100% more, in some cases! Behavioral economists have actually coined a term for the phenomenon: the “credit card premium.”)
Still, I found it hard to stretch $500 out over a month—especially in Manhattan. I finally sputtered out in the fourth week of July. I was disappointed I hadn’t made my money last the whole month. But my main goal was to be more mindful about my spending, and that I was.
I remember standing over a $3.89 container of dried cranberries, debating whether I’d get more satisfaction from gnawing on the fruit or from having that $4 in my pocket. (Ultimately, I chose the cash.) I made dinner at home instead of picking up takeout. When I did go out, I often decided to forego a second glass of wine and skipped entrees in favor of bar snacks or appetizers--decisions that were probably as good for my waistline as my wallet.
That also meant that the times I did decide to splurge on something like, say, going out for sushi, I appreciated it more. That sushi dinner felt special, and I savored every bite.
While I did run out of cash before the month ran out, I spent a lot less than I have in months past. Three strategies helped me stay on track:
I spent more time at home. I’ve often said that if you leave your New York City apartment, you might as well pay someone $40 to walk out the door because you’re likely to spend that much before you return. So I didn’t leave all that much. That turned out to be pretty easy since I work from home, have air-conditioning, and it was unusually hot out. If I did head out, I made a point of knowing where I was going and what it would cost me.
I found a partner to support my goals and hold me accountable. This one’s easy. My boyfriend is a musician and a part-time Apple employee. He has no margin for error on his budget, so he was all too pleased to hunker down with me. They say when you’re trying to get on a workout schedule, plan with a friend. (Several studies have found that we’re more likely to stick with an exercise routine if we do it with a friend or spouse.) Same goes for when you’re trying to stick to your budget.
I stayed off shopping sites. No more poking around on Garnet Hill “just to see what they’ve got.” It’s just too tempting--and too easy--to click and buy. Knowing I couldn't use cash to buy anything online anyway gave me an additional incentive to stay away.
Bottom line: I’m not likely to subsist on a cash-only existence. But I am sold on the practice of taking a wad of cash out on the first of the month and tracking its path. It helps me manage my cash flow and my expectations, rather than live with the illusion that my wallet is a cup and the ATM is offering free refills. I found that if I start with a full glass at the beginning of the month, I sip a lot slower. And it tastes better, too.