How you can pay off debts with a cash only budget in 2018

Getting into debt is quite simple and it happens all the time. Few mindless tour of the shopping mall, only making minimum payments using your credit cards, and….bang! You’re in debt before you can realize. You’ll find yourself so deep in debt that even thinking about living on a cash-only budget seems like a nightmare, with no way out.

On the other hand, paying down that debt is quite difficult. It will take lots of courage, and a proper plan for making smart money decisions. It requires adapting to a new lifestyle, spending habits, and living on a budget.

However, there will be obstacles standing in your way. For example - lifestyle inflation and the tendency to spend on things using credit cards and loans that you truly can’t afford.

That’s where having a cash-only budget can really help you to kill your debts. If you have any doubts about the concept of living on a cash-only budget or looking out how to pay off debts with a cash-only budget, here are the basics for you.

The concept of a cash-only budget

A cash-only budget is nothing but using the cash only for paying expenses. In that case, there’s no such thing as using credit cards or getting reward points. But you’ll be less worried about unintentionally withdrawing money from your debit card.

Many people take out the cash from the bank as soon as they get their paycheck each month. It’s a personal choice that they will pay for everything only in cash, and it’s a great way to control your finances easily.

Numerous studies revealed that you will automatically spend less with cash than you would with a debit or credit card. But you need to follow some specific tips that will encourage you to pay off debts with a cash-only budget plan.

Tip 1 Plan a budget that can stop you to spend more

Your initial step with paying off debt should be planning a budget. Through a proper budget plan, you can decide where your money should go exactly. That’s how you’ll know how much money you should keep aside to make monthly debt payments.

You need to compare all of your expenses with your income. By doing a side by side comparison you can actually decide how much your income exceeds your expenses.

You need to prepare a list of your minimum debt payments and choose which debt you’d like to pay off first and how much extra you have to pay.

If you don’t have a job with big income, find ways to save more money, or earn more money each month.

Tip 2 Set your budget by using envelopes

As soon as you set up a budget plan, it will allow you to manage monthly debt payments on time each month. The best possible way to do that is to use the cash envelope system.

Normally, we keep our income in checking accounts and spend through credit cards. At the end of the month, we pay entire bills or a part of those bills by using the money saved in the checking account. Stop doing that. Keep your money for fixed and variable expenses separately in separate envelopes as soon as you get paid each month.

You need to categorize the envelopes and use the cash for groceries, utility bills, gas, clothing, travel, etc.

It is wise to start using the cash envelope method for budget categories where you might overspend a bit. For example, if you tend to buy too much groceries or spend too much for dining out, after initiating the envelope method, it’ll be difficult for you to spend on that categories. In the end, you can save that extra spending and can contribute to your debt payments.

Tip 3 Once your envelopes are empty - avoid spending more

There’s no other way, once your cup is empty, do not fill it up again for that month. The cash envelope system will be effective if you avoid refilling the envelopes when they are empty.

When you use the money from your envelope for certain expense, you must know that you can no longer spend money on those expenses. This will reduce the urge to spend in that category.

This practice will help you to stick to a budget better even when you try to spend more.

If your envelopes get empty earlier than expected, you need to be creative and seek other options to meet those expenses without overspending.

Tip 4 Schedule your debt payments at the beginning of the month

Yes, the earlier you can pay your monthly debt payments each month, the better. It is because it’s difficult to save or store your money on something that you need to pay eventually. Sooner or later, you have to make debt payments, so why not at the very beginning? After making the big monthly payments, you’ll feel relaxed and can easily manage other small expenses in your list.

So, you should create an envelope for all your debt payments or save that amount in your checking account. Try to set all your debt payment due dates within 4th or 5th every month. This way, you can get the debt load out of the way early on.

If you run out of money in your envelopes, you don’t have to worry at all, because you’ve already made the debts away for that month initially. Now you just have to handle other expenses and manage the gaps in your budget.

Tips 5 Put extra money you earn towards debt repayment

If you can save extra money from your allotted funds in your envelopes, at the end of the month, make sure you use that money towards debt repayment even if the amount is very little.

Every extra payment counts, every single dollar can reduce your interest rates and push you closer to reach your debt repayment goal. Also, if you earn extra, using a cash budget plan can make it smooth for you to engage that added income toward debt as well.

By using a cash-only budget, you can practically plan a clear budget and diversify your spending categories into cash envelopes and make it manageable. Therefore, anything extra can go straight toward debt payment and not to your envelopes.

If you’re struggling with your finances and can’t cope up with your monthly debts, I’d suggest you give it a try. Trust me, it’s very easy to pay off debts with a cash-only budget plan and get back on track with your financial goals.