LearnVest’s New Year, True You Challenge: Week 2—The 7-Day, Cash-Only Detox

LearnVest’s New Year, True You Challenge: Week 2—The 7-Day, Cash-Only Detox

To help get you motivated to make progress on your money in 2015, we’re offering up weekly to-dos as part of our inaugural "New Year, True You Challenge" series.

It's the second week of January, and you've probably heard about a slew of diet plans for the New Year by now—from your co-worker who's going gluten-free to the friend who swears by the Paleo way of eating.

At LearnVest, we're eager to introduce a slightly different New Year's regimen.

This one isn't about cutting carbs or shedding pounds—it's a simple strategy designed to help you become more financially fit.

Learnvest

Get started with a free financial assessment.

It's called the cash-only diet—and it's this week's challenge. In a nutshell, it entails just using cash for the next seven days to pay for non-essentials. Read: no credit cards.

Of course, there are plenty of perks to paying with plastic—like the fact that it helps you build a heathy credit score—but research suggests that people are actually less attuned to the price of an item when they pay with credit cards versus cash.

No, we're not asking you to eschew cards forever. Rather, the beauty of this plastic-free exercise is that it's temporary—yet it's enough time to help show you  exactly where your money is going, and hopefully clue you in on how to better spend within your means.

You’ll likely notice that you're making more mindful money decisions—because you're conscious that once you run out of bills, you won’t be able to spend more.

Week #2 Challenge: Practice Paying Only in Cash

The ultimate takeaway of the cash diet is that you'll start to train your brain to actually stick to a budget, since you can only spend what's in your wallet.

Which brings us to step one: Calculate your one-week flex spending number, so you know how much cash to keep on hand.

To do this, take your monthly post-tax pay and subtract fixed expenses (like rent), financial goal contributions (emergency savings, retirement), and non-monthly savings contributions for things like gifts.

Next, divide that figure by 4.3 to adjust for the amount of weeks in an average month. The result is your flex spending number—or the cash you can use on whatever non-essentials you want for the next seven days, from massages to macchiatos. (Hint: If carrying around that much cash makes you nervous, leave half the stash at home at the start of the week.)

Now it's time to set all of your plastic aside—be it by emptying the cards from your wallet or placing them on ice in the freezer—and make a plan for tracking your cash transactions throughout the week. Will you physically write down each expenditure, or enter them into the LearnVest app?

Over the next seven days, carefully consider how it feels each time you pay for something in cash. You’ll likely notice that you're making more mindful money decisions—because you're conscious that once you run out of bills, you won’t be able to spend more.

And reflect on how you can apply the lessons learned this week to your overall budgeting strategy. When were you most likely to make impulse buys? What expenditures did you discover that you can actually live without?

Going forward, we bet you'll be more likely to pause before making a purchase—no matter how you choose to pay.

RELATED: Money Mic: Why I Went on a Cash-Only Diet

LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.

Learnvest

Financial planning made simple.

Get your free financial assessment.

Related Tags

Get the latest in your inbox.

Subscription failed!

You're Now Subscribed!