Forget Debit, Credit Cards: Try the All-Cash Diet

Jan. 26, 2010 — -- No doubt, you've heard of the Atkins diet, the South Beach diet and the Jenny Craig diet.

Now, allow me to introduce you to the All-Cash Diet, a regimen designed not to lose pounds but rather to add heft to your bank account. There are no calories to count, just dollars to save.

With the All-Cash Diet, you put away both your credit cards and debit cards and instead rely upon good old-fashioned cash to cover your day-to-day expenses. Instead of pulling out the cards for each measly purchase, go to the bank, withdraw enough cash to last you a week and then try to live on those funds.

Use it for the gasoline, the groceries, the morning coffee and just about any other daily expense.

This is a routine I've begun to follow myself as I look for ways to trim my personal spending. The early results are promising, but I can't say I've changed all my old habits. There's more work to be done.

My belief is that relying on cash in the wallet rather than plastic instills greater budget discipline and reduces impulse purchases. By relying only on the 10s, 20s and maybe even 50s in your wallet, you buy only what you really need rather than what you think you need or want.

The negatives of credit-card-spending are well documented, but it is only recently that attention has turned to the downsides of debit cards.

At one time, I was a debit-card addict, pulling it out for the smallest and most needless of purchases. My wallet overflowed with debit card receipts.

I actually thought using the debit card was good for my spending, as it prevented me from going overboard with a big purchase as you can with a credit card.

And it fed my desire to keep close track of where and how I spent my money. I've used Quicken personal finance software for many years, and I loved being able to download all of my transactions from my bank and see where every penny went. For a money geek like me, it was almost nirvana.

But what if that debit card only induced me to spend more pennies than I ought and produced data so minute as to be meaningless? Do I really need a record of every Starbucks transaction? Wouldn't it be better to just spend a dollar or two less each time I visit a coffee shop?