Jan 18, 2008

February: Month of the All-Cash Spending Experiment

I mentioned to Marc that I was thinking about doing an all-cash experiment, and he said he would be okay with it, so that was the deciding factor for me. Neither of us is thrilled at the prospect of using an all-cash system, but we are both interested in seeing if it really does save us money. So, we've agreed that February will be the month of the All-Cash Spending Experiment.

I think it's important to note that the purpose of the all-cash experiment isn't to reduce our monthly expenses, per se. And I'm not going to drag myself and one or both kids to AT&T, Verizon, or LA DWP to pay my bills in person. Instead, I keep thinking about a point Meredith made, that the fear of not having enough money at the cash register will curtail impulse purchases. So that's the purpose of this experiment: to see if going to an all-cash system curtails discretionary spending by 10% or more.

We'll be following a couple of guidelines to help us stick with the experiment:
  • When it comes to paying for gas, we'll still use our credit card. It's just not practical to pay with cash, since you have to pre-pay, yet you don't know exactly how much you'll need for a full tank. And there's usually at least one kid in the car, which would mean we'd have to take him out of his car seat, take him inside, then strap him back in. I can't think of anything that would derail the All-Cash Experiment faster than something that requires this much effort. So we'll be paying for gas with a credit card.
  • Bills will continue to get paid the way they normally do, whether by online banking or credit cards or checks. As I mentioned previously, I'm not going out of my way to pay bills with cash. I suppose there would be some psychological effect to walking into my mortgage lender's office with my mortgage payment all in cash, but I'm just not at the point where that's something I want to do. The one place that I could do it without any real extra effort is the boys' daycare, since I have to go there anyway, but I don't want to put off the director by showing up with that much cash.
  • I also reserve the right to do some shopping online, which naturally requires a credit card. Or a debit card, I suppose, but I never use my debit card and I like the extra consumer protection I get from using a credit card. But I don't expect any online shopping to have much effect on our end-of-month tally – I've been sticking to my second financial resolution for the year and haven't been buying much.
So basically, most if not all of the cash we spend in February will be brick-and-mortar store and restaurant purchases. Places like Trader Joe's and Target, Coffee Bean and Jamba Juice. I'm actually kind of excited to see the results. And of course, I'll keep you updated once we enter the month of February and the experiment begins.


Kacie said...

This will be interesting to see! Good luck with it

Living Almost Large said...

I am doing it for January, and honestly it's horrible. I did it for groceries and eating out. And what I've found so far, is I'm a super cheapskate. I can't spend the cash, so we're not eating out and I'm trying not to grocery shop.

I think it's a bad idea, I'm not saving 10% more like 100%. I keep on making crappy meals because I'm stretching everything.

Chief Family Officer said...

@Living Almost Large - LOL! I don't think you meant your post to be so funny, but I had to laugh at you not spending any money and eating crappy meals. I hope that doesn't happen to us! I've been menu planning the last couple of weeks and plan to keep it up, hopefully that'll help us!

Living Almost Large said...

No and I'll end up spending it in February to restock our pantry anyway and freezer. So it's just deferred spending. It's a mental block against spending cash.

So then I'll spend double in February because all essential I should have been buying and restocking I didn't. I bought only fresh fruits, veggies, meat. I even didn't buy milk because I was being cheap.

Yep it's not cool.

Anonymous said...

I am considering taking a stab at this as well. I will be watching for the "results show" - I can't wait to hear how this goes for you!

Anonymous said...

Awesome. It is great to see more people trying this. It will be interesting to gather more information and experiences.

I would love to do it with everyone, but with a 2 week old and my last MBA classes going on, I don't have the energy to commit to the preparation and tracking that I would want.

Good luck.

@Living Almost Large - it was terrible using actually cash for everything.

A couple of notes. I was able to pay cash at the pump, because in NJ you can't pump your own gas. Shelling out $50 cash to fill up really did make me think about which driving was a necessity and how much I drive.

I also agree that paying cash for a mortgage would really help with perspective. Companies want things as painless as possible so we easily forget the total truth and reality of the situation.

Finally, using say a Visa debit card online affords you the same protection as a credit card as far as fraud and other things. The one difference is that real money is held up while the charges are being reversed. I have never had to deal with either though.