How the All-Cash Diet Changed My Life


hand holding U.S. currencyAround 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.

RELATED: The One-Number Strategy: A New Approach to Budgeting

  • Jem

    On that last post, all I could think was “You still have $4,000 in debt, and you spent $250 on a bag?” Really? This comes down to the “I deserve it” culture. No you don’t. Pay off the debt first. Completely. Then save for the bag.

    • Emily

      I disagree. As long as you have a plan in place to tackle your debt (the article says she had a 0% interest payment plan in place), you are making payments beyond the minimums, and you don’t take on more debt to make the purchase then it is ok to treat yourself and enjoy some of your money. It’s a similar concept to when you are trying to eat healthier: you are setting yourself up for failure if you completely deprive yourself of your favorite non-healthy food. If you allow yourself to have the non-healthy item every once in awhile then your lifestyle change is more likely to stick.

      • Tommy

        Emily, I agree to a point. Treat yourself to a certain degree. Is there some reason a $75 off brand purse doesn’t bring about the same satisfaction? Oh and 0% interest is a joke.

    • Lauren Lever

      If you think about it $250 is really not expensive at all for a purse. A purse is something you are going to be wearing possibly every day for a year, so basically you are paying $.68 per day for that purse. I know that is some hardcore rationalization, but it doesn’t seem so bad when you put it in terms of day-to-day use.

      • Tommy

        Lauren “not expensive” is a relative term. If one makes $100,000 and has $1,000 in debt, then yes it’s not expensive. However, if someone is making $25,000, has $5,000 in debt then yes that purse is expensive. It’s all about attitude and how serious one is about eliminating debt and building wealth.

        • Lauren Lever

          What kind of debt though. I have about $30k in student loans and about $8k in car loans and credit cards (combined), so I dunno, I have a lot of debt, but I had already committed to paying it all off… Some would say any debt is bad, but unless your parents pay all your education or you happen to be awesome and get a scholarship you are most likely going to have that kind of debt if you want any kind of decent paying job.

      • Emily

        Often purses that cost around $250 are higher quality too. In the long run I’ve actually saved money by purchasing a classic style “expensive” bag because it holds its shape and still looks nice after a year of daily use. Cheaper bags (under $100) are usually not leather or other high quality material and they often break or start to look ragged after awhile. When I used to purchase lower price bags, I ended up having to purchase replacements much more frequently.

  • concisecactus

    If you can buckle down and budget an all cash life style, I don’t understand why someone couldn’t manage credit card use and gain from the miles or points on daily purchases.

    I use my credit cards for groceries, bills, etc… However, I also pay them off each month. No cost to me and I get the bonus of the rewards those cards offer. My last plane ticket was free, thanks to these rewards.

    You don’t need to cut up your cards. You just need to buy what you can afford and pay it off. If the temptation is too much, then make a pact to pay off each purchase within 24 hours on your card.

    • Kingcharming

      In addition to getting robbed in the street, that’s an extreme, but hey, I’d rather have my butt covered by credit insurance than filing a police report and hoping for a dream.

    • Michelle@Radiant Brown Beauty

      Not everyone has the discipline to just buy what they need on credit. When you amass large amounts of debt on credit card, it’s not something that just happens. it’s very easy for those who have a “buying” problem to just pay it off within 24 hours. I can attest to that. For those of us struggling, an all cash diet is a great solution

      • concisecactus

        Believe me, I understand what you are saying. My post was written as someone who had amassed a large amount of debt and managed to pay it off. (Part of it was college and books which I couldn’t afford to pay for outright.)

        While I could have gone all cash, I choose to use my cards as a tool and acknowledge that they aren’t a money tree. I paid off all new purchases in full and started paying down existing debt. (Transferring to other cards at 0% when I could.)

        Cash and debit cards are a liability as the other poster above mentioned. If you lose your wallet or get robbed (hopefully not), that cash is GONE. Credit cards can simply be cancelled and replaced. Thinking about the most recent data breach at Target, debit cards are even scarier. You can be liable for $500 or more of charges to your debit card. Credit cards have better protection.

        Besides the rewards, extended warranties, price protection, and other benefits…your credit card offers peace of mind. It is a tool with benefits that also protects you. When you think of it as a tool and start using it as one rather than treating it a bottomless piggy bank, it can become easier to pay off.

        Change the way you think and then cash isn’t the only option.

        Either way good luck to anyone that is trying to pay down debt. Do what works for you.

        • Michelle@Radiant Brown Beauty

          You are right. CCs are a tool. And the lost wallet situation, I do agree that it would be best not carry cash. For me, I’m thinking of my cash diet more as I’ll use my debit card as the cash and leave the cc’s at home or even frozen in ice.

          I get sucked in by the HSN and QVC shows! Very little self control so my only recourse to build some discipline is using cash only/or debit. I don’t go over my debit card because while I do have a LOC for overdraft, I learned the hard way on that one.

          CCs truly are a tool (like when you need to rent a car or make a large purchase and don’t want ppl having access to your bank account). I’m in the early stages of learning how to treat them like tools.

          The debit card liability limit is only $50

          • concisecactus

            FYI the debit card limit CAN be a lot more than $50.

            If you notify them within 2 days of theft it is $50. If it is within 60 days, then it is $500. If it is after 60 days, it could be all of the money.

            Ex: With Target, they didn’t notify us right away, so technically 2 days had already passed. Target says they will cover the customers, but it is a grey area as far as banks if Target wasn’t stepping up.

          • Michelle@Radiant Brown Beauty

            but who doesn’t check their bank accounts for 60 days??? I guess there are people but the 1 thing I actually do is check my accounts in Learnvest daily (money minute). I also only bank with a credit union. Not sure it matters but have never had issues before.

  • Jessie

    This article made me cut up 2 credit cards. Hopefully on my way to paying off my debts!