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For those of you who have never heard of a cash diet, it may be time that you get in the know.
Just a little background for you, I started my cash diet a little over a month ago now and have already seen an 18 point increase in my credit score. I started my cash diet because I saw my then great, financial status beginning to go down the toilet.
In January I moved to a new state and started at a new school, so my spending had increased a bit in that time frame. Causing my credit score and savings account to drop significantly, all the while my credit card balance increased way too much for my liking.
So I began this new financial journey. A journey that has proven to be beneficial thus far. My intention is to work this habitinto my lifestyle in the long run. This doesn’t mean I plan to stop using credit cards altogether.
I’m just training myself to be wiser about my spending, by only buy things that I actually need when I have the cash to back up my purchase. Rather than throwing the expense on the pile, thinking I’ll pay it off later.
A Cash Diet Will Help You Spend Less
Rather than swiping a card and not having to look at the damage/money loss immediately is much easier on the conscience. When you can see how much money you have left for the week you are more likely to spend it wisely.
You’ll end up buying more of what you need, rather than the things you want, but don’t necessarily need.
If you’re constantly using a credit card you’ll go out and buy that new makeupor pair of shoes, with the mindset of“Oh I’ll pay it back later or after my next paycheck.”
Versus if you can see your spending limit in your hand, in cash form. Knowing that you only have that much money to get you through to your next paycheck. You’ll be more likely to save it for things you definitelyneed like gas and foods.
A Cash Diet Will Help You to Better Understand Your Wants and Needs
Living a cash-only lifestyle, even if only temporarily, will help you get a better idea of what you truly need to live comfortably. Rather than beyond your means and in an exponential amount of debt.
You’ll come to realize that you were making many unnecessary purchases. On things, you maybe didn’t need or haven’t used more than once since you bought it.
Instead of buying that cute new eyeshadow palette for $20+ you’ll look at the cash budget that you’ve set for your self and realize that you really need gas in your gas tank much more than you need eyeshadow.
We’re all human, and we’re living in the 21st century, surrounded by all sorts of flashy shiny things that we’d like to have. But as I said, we arestill just human. Our basic needs for food and shelter still exist.
Getting your financial situation in order will help you get into a position where you can get that fancy eyeshadow palette and not put yourself out on your weekly food
In the Long Run, a Cash Diet Will Help Improve Your Credit Score
As you may or may not know, your credit score is largely dependent on your debt to income ratio. If you’re spending cash rather than racking up more credit card debt, you’ll be able to get on top of that credit card balance and significantly pay it down.
I’ve found that if I give myself a cash budget for spending each week, I’ve been able to bring my credit card balance down while simultaneously bringing my credit score up.
I managed to bring my credit score up a whopping 18 points in a matter of about 3 weeks time with this method.
There are a number of things that can have an effect on your credit score, beyond just your spending and ability to make your payments. To learn more about what your credit score is and what it reflects about your financial life, check out this article.
A Few Things to Consider or Plan Before Starting a Cash Diet:
It takes a certain kind of person who can easily adapt to a new lifestyle choice. A cash diet may or may not be for you, so here are a few things to take into consideration before jumping into action.
Just like with any other kind of diet or serious lifestyle change, you have to be consistent and dedicated. There will be slip ups and cheat days, but as long as you get yourself right back on track, you can correct the damage in no time.
Along with consistency and dedication, you also have to be organized and able to plan ahead. Knowing what expenses you have coming your way each month is just as important as being prepared for the ones you don’t expect.
You’ll need to be able to give yourself an ample cushion of cash to
You may have to whip out your credit card during some sort of emergent event, and that’s totally fine. That’s what it’s there for. But sticking to your cash guns as consistently as possible, while keeping those wants vs needs in mind, you will see that a cash diet is exactly what your bank accounts and credit score needed.
As long as you go into your cash diet with an established plan
What to learn more easy ways to become more money savvy? Check out my blog post explaining why I have multiple checking accounts.
