Around this time of year, it’s natural to hear all about friends and colleagues who’ve decided to go on one diet or another in an attempt to get in shape.
But while most of them are eliminating carbs or swapping juicing recipes, others may be trying out a regimen designed to give their bank accounts a boost: the all-cash diet.
Instead of counting calories, this diet requires setting aside your credit cards and only relying on old-fashioned cash to cover day-to-day expenses. By limiting your spending to just what’s in your wallet, goes the theory, you’ll be more likely to stick to a budget—and less likely to make impulse purchases with plastic. In other words, you’ll buy only what you need and less of what you simply want.
And it can be a winning strategy.
According to a 2016 NerdWallet analysis, the average American household with credit card debt owes a balance of more than $16,000. But people who have switched to all-cash lifestyles for a time say that forcing themselves to live only on what’s in their wallets increases their ability to pay down debt—and live within their means.
Since we’re deep into dieting season, LearnVest scoured the country and found three all-cash dieters who were willing to share their stories of how they went from being buried under debt to flush with cash.
“I cash-dieted … and paid down over $100K of debt.”
In 2005, Adrian Johnson was tired of juggling debt payments that were overwhelming the teacher’s life. Between the mortgage on his Arlington, Texas, house, student loans, credit card debt and payments on a motorcycle, Johnson owed about $125,000.
“I decided that enough was enough,” says Johnson. “I was working for everyone but Adrian, and getting poorer while all of my creditors were getting richer. I was tired of being broke.”
So Johnson made a bold move: He cut up his credit cards and switched to an all-cash lifestyle using the envelope system, made popular by financial motivational speaker Dave Ramsey. The idea is to budget a set amount of cash for monthly expenses and then divvy up the money into various envelopes earmarked for food, gas, clothing and entertainment. Once an envelope is empty, there’s no more money for that expense until the next month.