Cash Diet 2024: How do You Do the Money Diet?

Many personal finance experts swear by using a cash diet to kick start good money habits, get out of debt, and other short- or long-term goals. This article explains what a cash diet is, its pros and cons, and how to implement it!

Not only will it help you meet all your financial obligations, but it will also help you get a fast start on your financial goals.

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The concept of dieting is gaining popularity – even in personal finance

“Diet” seems to be a popular word nowadays; you have your keto diet, your gluten-free diet, and of course, your generic healthy diet. Even in the personal finance world, “diets” seem to be gaining popularity as well, as more and more people discover new ways to persuade themselves to spend a bit less and save money. I’d like to share with you today my thoughts on one specific method – cash diet.

This represents a welcoming trend

One the one hand, such a trend is a welcoming sign. I do believe that the general principle of living below your means and saving in preparation for a rainy day is one that ought to be adopted by every one of us. It provides us with a cushion in case of emergency, and it teaches us to appreciate how fortunate we are to be in the position to be able to spend less and save more without having to starve ourselves or feeling threatened by lack of safety.

But it is a bit alarming

I do think that one of the social forces behind the growing popularity of such an emphasis on savings is the constantly widening wage gap and the fact that the new generations have to shoulder burdens that their parents did not have to experience (or at least to a much lesser extent), such as the skyrocketing housing prices or the student loans.

According to this report published by the Economic Policy Institute, the CEO earns, on average, 271 times more than a regular employee. For Hollywood A-listers, contracts in the millions for movie roles are not an abnormality. Am I saying that they are not worth their salary? Well, it is a difficult topic, but collectively, the huge concentration of wealth among the selected few has created a social imbalance that propels, or sadly, forces, people to shy away from excessive spending and opulence and turn to simple lifestyles to find happiness.

Deep dive into cash diet

Simply put, an all-cash diet means that you use only cash to buy items. Similar to different levels of eat-less-meat diets such as a vegetarian diet (no animals but may eat products that come from them such as dairy and eggs) and vegan diet (no animal products whatsoever), you can choose different levels of cash diet as well depending on your comfort level.

You can choose to spend cash on a select few categories of your spending. Alternatively, you can be more hardcore and go all in with an all-cash diet, meaning that you use only cash to buy literally everything in your life, from movie tickets, to grocery, to gas. Some people recommend that at the beginning of the month, you put budgeted amounts of cash into different spending envelopes, and only use the money in the envelopes throughout the month. Once an envelope is emptied, sorry, but you have no more money to spend for that month for this particular category.

Here is a step-by-step guide on how to implement a cash diet:

  1. Look back at your spending patterns for the last three months to come up with a baseline for your living expenses. After all, you don’t want to put too little or too much cash in your envelopes!
  2. Decide on what interval you’d like to try this approach for. I recommend that you give it a try on a weekly or monthly basis.
  3. Go to your bank and withdraw enough cash from your checking account or savings account for the next week or month.
    1. If you are a Canadian resident and are looking for a high interest savings account, you may want to check out the Savings Plus account from EQ Bank!
  4. Get a few envelopes and label them based on the categories.
  5. Put cash inside each envelope.
  6. Track your spending to see how you do, and adjust accordingly. It is important for you to revisit this final step every so often so you always have enough money to make ends meet. I recommend that you set up a spreadsheet to keep track of your expenses. If you’d like, sign up for my newsletter and get a free copy of the monthly expense tracker that I personally use!

At the minimum, I recommend that you have at least the following envelopes:

  • Rent
  • Utilities
  • Groceries
  • Transportation
  • Clothings
  • Entertainment

An all-cash diet for me is an interesting concept that could be exciting and difficult to implement at the same time. If you are wondering whether you should try the cash diet, here are a list of pros and cons to help you decide:

Cash diet: pros

1. This approach is helps (or forces) you to stick to your budget

If you follow the rules properly and are determined to not spend an extra cent even after you use up all the money in the envelopes, then, congratulations, you have fixed expenses and stayed in your budget.

2. It also allows you to develop or improve your spending habits

Human beings are ingenious when it comes to maximizing utility given limited resources. With limited amount of money on hand, you may find yourself looking much more closely at how you spend money, and find ways to spend money more intelligently that you have never thought of before.

3. It is a great way to make you think twice before you buy things. It will help with minimizing clutters in your space

Psychologically speaking, humans have a stronger emotional connection with cash, which is the physical form of currency, than with plastic credit cards. This makes parting with cash more difficult, and will force you to think more deeply before making a purchase. You will find yourself asking “do I really need this” more often before every purchase. As a result, you will walk away from impulse buys more often, which, of course, saves yourself from frivolous spending.

A side benefit of the above is that it helps you maintain tidiness of your space, because, well, you have fewer trinkets lying around.

4. It helps you mange your cash flow

Spending only cash helps you manage exactly how much money goes out each month. If you have a steady stream of income coming in every month, you can get a very good estimate of how your money comes and goes.

Cash diet: cons

But just like coins have two sides, the cash-only diet doesn’t come without its disadvantages. Here are some of the cons that you need to weigh against the pros to decide if it is really something you want to pursue.

1. Cash is inconvenient!

In this digital world, carrying cash can almost be a foreign concept. Carrying money in its physical form around is incredibly inconvenient, especially if you are carrying multiple envelopes of cash. Imagine what would happen at a grocery store when you buy grocery, which should come out of your “grocery” envelope, but at the same time you want to buy a chocolate croissant at a bakery in the store, which should really come out of your “treats” envelope? Would you have to juggle two different envelopes, or would you have to pay with money in one envelope, and, upon getting home, transfer cash from the other envelope?

Having to store changes can also be a huge hassle, because, let’s be honest here, coins are heavy. Of course, they could be a good way for some unintentional exercise.

2. Using cash causes others inconvenience as well

Do you remember waiting impatiently in line because the person in front of you has to fumble through his pockets only to take out five different sizes of coins that amount to $0.65? I personally feel terribly embarrassed if I am the cause of a long line up. We live in a fast-paced environment, and it is unfortunate that most of us have lost the ability to cultivate genuine relationships in grocery stores. We just want to do our things, and we want to get out as fast as possible.

3. Buying things with cash may not be the cool thing to do

Sad to say, but I think the cool factor is very important, because whether we admit it or not, most of us still really care about others’ perception of us. Being the only one using cash while everybody else around you swipes their credit cards quickly could make you feel out of place and uncomfortable. Of course, this is less of an issue if you hang out in a group that is committed to this approach, which could actually be a fun idea when I think about it.

Final words

The all-cash diet approach is a money management technique recommended by many, including Erin Lowry from Broke Millennial. Whether you are looking to pay down debt, build up your emergency fund, save for retirement, or simply reach financial freedom earlier, this method can help you reach your goals faster.

Personally, I’d recommend a middle-of-the-road approach, using a mixture of cash, debit cards and credit cards. I’d recommend picking one or two categories that you easily overspend in, and use cash for those to force yourself to stay within your predetermined budget.

Start your cash diet challenge today!

2 thoughts on “Cash Diet 2024: How do You Do the Money Diet?”

  1. Interesting concept! Here in South Africa, it’s dangerous to carry around large amounts of cash, because you might be ‘relieved’ thereof. If you want to spend less you can always set a daily limit on your debit card.

    All the best, Michelle (


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