The 7-day Challenge
The grip of mammon over our lives is fairly invisible most of the time. Only when bills pile up or we consider major life changes like relocation or career shifts do we start to notice how bound we are by our financial concerns. Here’s a little test to make those financial ties a little more easy to discern.
Step 1: Figure out how much cash you need to cover a week’s worth of gas, groceries, entertainment, dinner on the town, breakfast at McDonald’s, books, DVDs, cosmetics, gifts — the whole gamut of casual expenses.
Step 2: Be honest. Don’t deliberately overestimate so that you’re sure to have enough cash to get through the week.
Step 3: Set the anticipated amount aside and don’t use debit or credit cards.
Can you make it a week?
The purpose of this exercise is to develop a mind-set where you seriously consider daily cash expenditures. Doing so will give you greater control over spending and saving, and take you one step closer to being independent. It can seem a minor thing to track the daily outflows of cash towards donuts or lunch or dry cleaning, but our habits of casual spending speak volumes as to how we view the role of money in our lives.
(thanks to Bankrate.com)
I love this advice (and will be taking your challenge). Along the same lines, I’d like to reccomend to anyone who feels like trying it out, Financial Peace University is a class for adults on how to manage their finances, with this idea behind it - the money that we have is not ours, it is God’s. Don’t we have a responsibility to manage it wisely?
Anyway, having sat through all the video lessons with my parents, and having a copy of all the class materials myself (I’m hoping to have enough money to take it next fall) I can vouch for it. Like Steve’s proposed weekly budget, it works.
Comment by Virginia — June 26, 2007 @ 11:23 am
Steve,
That is good advice. My wife and I have a good budget set for our expenses. We’re working hard at removing our credit cards, and have not used them in the past two months. We all can live without credit cards.
Comment by Dan — June 26, 2007 @ 11:28 am
Dan, I think that’s interesting what you say about credit cards. Maybe I should clarify a bit my financial view vs. this exercise.
The exercise is a cash-only one because it forces you to draw from a limited bucket. Cash exists as bills and coins, and so when those are gone and spent you have nothing else to draw upon. As an exercise, that’s a healthy way to impose some financial discipline.
I have a few credit cards, and I use them as much as I can. I get cash back on them (may I take this opportunity to plug the best of them, the Blue Cash card from American Express!), and I use them in place of cash whenever possible. I pay off the balance in full each month. Using credit cards is not a sin. I have no problem with viewing them as a form of cash replacement — so long as there is some financial discipline behind their use and the possibility of deferred payment isn’t used as an excuse to spend more than you typically would.
Comment by Steve Evans — June 26, 2007 @ 11:40 am
And eliminate impulse buying? NO WAY!!
Comment by Spandex King — June 26, 2007 @ 11:46 am
Set the anticipated amount aside and don’t use debit or credit cards.
What do you mean by this? Do you mean don’t buy any groceries or gas for a week or do you mean live on cash instead of cards for a week?
Comment by Geoff J — June 26, 2007 @ 11:56 am
I’d recommend Bankrate.com to anyone. Lots of good advice there. You can also sign up for RSS feeds on various topics or subscribe to their daily email notifications.
Liz Pulliam Weston over at MSN Money also does regular articles that are quite good.
If you’ve got real consumer problems like creditor harassment, mortgage fraud, credit report errors, or even just being sold a “lemon” (defective auto), the National Consumer Law Center is a great place to start. They sell short and informative guides oriented towards consumers (and guides oriented towards consumer lawyers, but you can ignore those).
And feel free to pretty-much ignore that well-intentioned, but slightly misguided article that just came out in the July Ensign.
Comment by Seth R. — June 26, 2007 @ 11:57 am
Oh, looks like you mean pull out a cash allowance at the start of the week and spend only that money. Right. (We actually already do this in our family. Works like a charm to keep us on track with our budget.)
Comment by Geoff J — June 26, 2007 @ 11:59 am
Geoff,
Considering that many banks include your hidden “bounce protection plan” limit as a part of your “total” when you access an ATM, it’s not that bad of an idea. Just for a week long experiment anyway…
Comment by Seth R. — June 26, 2007 @ 12:00 pm
Dan,
Credit cards are a great resource. IF you pay off the balance in full each month. If however, you’re carrying a balance on a credit card each month, you’re a financial time bomb waiting to happen.
But for those who pay in full each month, it’s a great way to track expenses, and avoid carrying around dangerous amounts of cash everywhere. If you’re disciplined about it, there’s nothing wrong with using plastic.
Comment by Seth R. — June 26, 2007 @ 12:04 pm
Steve, are you trying to lure us into some sort of multi-level marketing pyramid scheme?
Comment by John Williams — June 26, 2007 @ 12:31 pm
I can’t conceptualize using cash– I never carry it. I am definitely part of a generation that has come of age almost completely reliant on using debit cards and online bill pay and banking. Would be interesting to try.
I have found I can curb lunchtime spending by taking those kinds of purchases out of my food budget– when I think to equate a sandwich with the number of meals I can get out of some milk and a box of cheerios (I live alone- that can go a long ways), I tend to skip going out.
Comment by Melanie — June 26, 2007 @ 12:31 pm
Geoff, Melanie, and you other cash-haters — yeah, this experiment is definitely not tailored to those that belong to today’s cashless society. That said, you can adapt it fairly easily, by simply keeping a ledger for a week and deducting from a set max. The problem is one of restraint — when you do this experiment with actual cash, when it’s gone, it’s gone. If you did it with plastic I doubt the effect of hitting zero would be as dramatic, unless you had some other safeguard in play (spouse takes away cards, etc.).
Comment by Steve Evans — June 26, 2007 @ 1:10 pm
Steve,
#3,
What I was meaning by my comment was that our situation being what it is, we’ve made that commitment. I actually agree with Seth and you on how useful credit cards are. Once ours are paid down, that is our plan, to use them monthly, pay them off, and accrue the great credit rating. We just happen to be in a situation right now that’s tougher than we would like.
Comment by Dan — June 26, 2007 @ 1:10 pm
#10–of course he is! Surely you’ve noticed that this is bycommonconsent.COM, as opposed to, say, our non-profit would-be competitors at timesandseasons.ORG
Comment by Kristine — June 26, 2007 @ 1:37 pm
Kristine is precisely right. My thirst for filthy lucre knows no bounds. But I have it on good authority that T&S has nearly blown its 501(c)(3) status a half a dozen times because of Matt Evans alone.
Comment by Steve Evans — June 26, 2007 @ 1:45 pm
Dan,
Good luck with your efforts.
Comment by Mathew — June 26, 2007 @ 2:14 pm
I have teenagers; therefore I have no cash.
It is interesting how frugality came to me “naturally” and I have never had problems in this area, even when my food budget was $1 for a week (Top Ramen — arghh). My sister, on the other hand, has struggled with financial problems her whole life. I wonder why that is?
Comment by StillConfused — June 26, 2007 @ 4:16 pm
We don’t track our daily cash flow, but we do track it weekly. We have a budget set out that is broken down into monthly and weekly allotments. Every two months we review our spending and adjust where necessary (increase or decrease if required). We’ve been doing this since January and it seems to be working well so far.
Comment by Kim Siever — June 27, 2007 @ 8:53 am
The author, Steve and I seem to have a similar financial outlook (response #3) — I use my American Express whenever possible to get the miles. We have never carried a balance on any card and we’re quite disciplined financially in regards to our spending. We’ve taught our children that there’s nothing evil about credit cards, but they are a convenience and not a license to buy things that you don’t have money for. But our recent move to Nigeria has forced us to adapt to a cash mentality and it’s been quite a difficult adjustment. Whenever we go into the country we have to look at how long before we return to the States and make a guess as to how much money we will need in that time span. So it’s kind of like Steve’s experiment, only over a period of, at times, months. We bring in $100 bills because that’s what the black market money traders prefer and how you get the best exchange rate. We can’t use credit or debit cards there at all because of fraud threats. And it’s a challenge when you go out to eat or go shopping to estimate beforehand how much money you’ll need. You don’t want to be loaded down with too much cash because there’s always the threat of robbery and you don’t want to call attention to yourself. But most of the time we end up carrying around large wads of very dirty Nigerian bills (their largest bill is worth $7). Eating out is expensive and when you’re with a large group settling the bill the stack of money can be easily a foot high. But when we’re estimating our money requirements, we usually end up violating Steve’s rule #2 and bringing in a lot more than we think we’ll need, just because we don’t want to get caught short of money. We’ve found when we’re just spending cash, it’s much more difficult to track where the money goes. I like having the credit card bill to see how much I’m spending on groceries and eating out and everything.
Comment by CW — June 27, 2007 @ 10:00 am
Sounds like a party.
Comment by John Williams — June 27, 2007 @ 10:14 am