Since the New Year my wife and I have a new plan for saving money – CASH. We got married at the backend of last year so invariably that cost a lot of money. Came straight back from our two week honeymoon to Xmas and NY, so again, money spent. We have plans to get a house, maybe a family and so on, so a thorough look at the budget was important our plan this year was to save at least £5k – that’s 10% of our income, more or less.
My income is pretty straight-forward – monthly pay, £2200 after tax. My wife’s is more complicated though - £650 monthly from one job as an employee, £180 weekly from another job self-employed.
This always made budgeting difficult when we lived off credit cards. You get one persons pay, pay off the credit card (or most of it anyway), then each week have to remember to move some of that weekly pay into the relevant account to cover whatever bills are coming out.
When we sat down and looked at our budget we noticed an interesting coincidence. My monthly pay and her monthly pay were almost exactly the same as our monthly outgoings. Her weekly pay was the same was our weekly outgoings.
Monthly? Rent, utilities, phones, internet, savings, tax (for self-employment), travel cards (Zone 1-2 London), insurance etc.
Weekly? Human food, cat food, lunch at work, going out money, booze, meals with friends, expensive cheese, snobbish coffee, etc.
Since we had this weekly amount in cash we thought we’d try an interesting experiment – live off cash. Every Sunday evening we draw out £170 in cash (leaving a tenner in for good measure) and put it in a tin, then just take out of the tin as we go along.
The impact has been amazing.
I never realised how detached I had become from budgeting, self-control and the reality of money when I was living off credit cards. We used credit cards for nearly everything – deliberately. Neither of us had a great credit history – no problems, just not much credit used. So we thought we would start using it to build up a history. Trouble is it bears no reality to any budget you set.
Picture this – Tuesday morning, hard day at the office, you’re walking to another meeting and you pass a coffee shop. Your “treats” budget is £50pm. You remember a few coffees here and there, the odd drink after work perhaps, but have no idea really. How do you know whether you can stay within budget by having that coffee?
What rules about living off cash is that budgeting is immediate. You look in your wallet, you have a tenner. You know that‘s all you’ve got for the week at work. You can have the coffee if you want, but you a) have to have a cheap lunch b) have no other coffees all week c) take food in from home d) spend less money over the weekend.
Trying to decide if you can afford a coffee when you have access to £3000 on a credit card is basically impossible. Trying to decide if you can afford a coffee when you have a tenner in your wallet to last you three days is easy.
Other breakthroughs my wife and I have had –
Sitting at home with the wife before we went out shopping, deciding that as we were going out that Friday night, we would only buy food that would allow us to eat food we already had in the cupboard or freezer; deciding a few weeks later that we would stay in this weekend to allow us to restock the freezer.
Getting a kick of managing to eat at work every day all week for a tenner.
The joy of avoiding spending any cash all day for two consecutive days.
Realising that we could cook twice as much food for basically pennies more, then take it for lunch, and the money we save would buy us a couple more drinks on Friday night, pay for a new book, or if we did it all month, buy a new top or pair of pants.
Blowing money on a take away at the beginning of the week and regretting it all week when we had no money to go out.
In all the cases above, with a credit card it would have been so easy to just think “oh we’ll stick it on the card, we’ll stick it on the card, we’ll stick it on the card”. That’s how the bills rack up.
There’s also a reverse psychology in play. Twice since New Year (7 weeks) we had to draw out an extra £20 to get by – and boy it sucked. I felt like a failure; I’d set a standard and failed to stick to it. The following week I tried extra hard to stick to the budget.
It becomes like a game – how little can you live off. And unlike living off a CC, the success is immediate – making it to Friday with half you cash left and knowing you can blow it all and stick to your budget – amazing feeling.