This article originally appeared in the Spring 2024 issue. View the full issue here.

Debt is a devil – no doubts there. But are there strategies to help deal with unplanned spending, rising interest payments and that horrible sense of being in over your head? Consider the cash-only diet, a structured method to tackle and manage financial obligations using physical currency for every day, variable expenses.

Skip the credit cards – you’ll only use cash.

First, you’ll be working to halt the accumulation of additional debt, and secondly, developing a clearer understanding of your financial circumstances. Win/win.

Just as unmonitored eating can lead to weight gain, unchecked spending can result in escalating debt. Using a credit card lacks that tangible sensation of parting with money, leading to a disconnect between purchase decisions and budgetary realities.

Handing over physical currency creates a tangible, almost painful awareness of spending, which can instill discipline and mindfulness in our spending habits, steering us towards healthier financial behaviors.

We’re not suggesting you should rely on cash for all transactions. Fixed recurring expenses such as rent, mortgage, utilities, phone bills, internet charges, insurance and scheduled debt payments should still be managed electronically to ensure punctuality, to avoid late fees and dings to your credit score and maintain a record.

Let’s get started.

Begin With a Budget

Starting a cash-only diet requires a little preparation, but quickly becomes a straightforward way to monitor and control your finances. Understanding your financial landscape starts with a budget. For first responders, whose schedules are often not the traditional 9-5 work day, this step is especially critical.

Begin by listing all predictable and consistent monthly expenses, such as rent or mortgage, utilities, phone bills, insurance and any debt payments. Subtract these expenses from your net pay (what you take home after taxes and other deductions) and what’s left is available for everyday costs and potential savings.

For instance, if your net pay is $3,500 a month and your fixed expenses amount to $2,500, you have $1,000 left to allocate towards daily expenses and savings. With this in mind, categorize your daily and miscellaneous expenses, creating physical containers for each type. Use envelopes, jars, or any other holder you like and label each – “groceries,” “entertainment,” or “dining out,” etc. Include categories tailored to the lifestyle of a first responder, such as uniforms, gym memberships, or even fuel for work commutes.

Now, distribute your remaining income – in cash. If you have $1,000 left after accounting for fixed expenses and you calculate that you spend about $200 on groceries and $100 on work meals, put those amounts into their respective containers.

Setting firm limits for each category will ensure you’re living within your means and show you where you could potentially save more.

Practical Tips

The cash-only diet is all about effective cash flow management. The “dining out” container is empty by mid-month? Think creatively and cook at home.

The idea is to manage expenses with tangible cash but that doesn’t mean you shouldn’t document your spending. Keep receipts and store them in the same expense containers or create a spreadsheet to log them. It may seem like a lot of work, but that’s precisely the point – if you associate spending with the headache of keeping track of the numbers, you’re less tempted to spend and more aware of your spending habits.

You can review your cash flow and spending and gain insights into whether high-stress days correlate with specific spending habits. Does a grueling shift create an uptick in comfort food purchases? Recognizing patterns can help you make healthier financial (and dietary) decisions.

Leftover Cash? Really?

When you succeed with the cash-only diet, you might even have some left over cash at the end of the month or pay period, giving you an opportunity to boost your financial health.

First, pay down existing debts, especially those with high interest rates (notably credit cards), which can become major stressors over time. Making additional payment will reduce the principal amount faster, lowering your final total cost of the debt.

Next, build an emergency fund. Given the unpredictable nature and occupational hazards faced by first responders (particularly important for volunteer firefighters) having a safety net is essential to cover unexpected medical expenses, vehicle repairs, or any number of unforeseen situations. Maximize the growth of this fund by placing it in the highest-yield savings account your financial institution offers.

Invest in your future by contributing the annual maximum to a secure, tax-sheltered investment vehicle. If your employer offers a 401(k) with a matching contribution, take advantage of this free money. Contributing enough to get the full match effectively gives you an immediate return on your investment. Canadian readers might choose a Registered Retirement Savings Program and take advantage of similar employer-match programs. Finally, if you have a High Deductible Health Plan, contributing to a Health Savings Account can provide tax advantages and help cover future medical expenses.

There are drawbacks to the cash-only diet. Some restaurants and other businesses have now gone cashless, so planning ahead is a must. Theft is an issue because cash, unlike credit and debit cards, isn’t covered – think carefully about how much you carry with you. Most credit cards offer user perks, including points and miles that you’ll miss, and going cashless won’t help your credit score. That’s determined, month over month, based on how responsibly you pay off your card balances.

Give it a Try

Flexibility is key. A one-month cash-only trial will give you a snapshot of your spending habits so you can see where you spent more than anticipated and where you saved. Then continue, modify or even relax certain aspects of the plan. Even if you find that a strict cash-only approach isn’t entirely sustainable, you’ll have shed light on spending habits you weren’t aware of. The goal isn’t just to mindlessly save money, but to cultivate a healthier relationship with it, creating a more balanced and stress-free life.

This article originally appeared within the Spring 2024 issue. View the full issue here, or browse all back issues in theCRACKYL Library.