Save Yourself 18%? Cash Only Spending Experiment

Posted on June 27, 2007

With June drawing to a close, I wanted to lay out the plan for the cash only spending experiment in July. I talked about the impetus for the experiment in the ditch the credit card and save post.

Using the scientific method here is the break down of the experiment :

Goal : Test whether spending only cash will save 12-18% as Dave Ramsey suggests.

Hypothesis : Spending only cash will reduce the amount of money consumed in a given month.

Control : Currently the plan is to compare the cash only spending to the average of the previous 2 or 3 years of July spending, which was 95+% on credit and debit cards. I need to dig into the numbers a little more to find the baseline numbers that will account for things like vacation and other irregular spending. I may end up using an average of the all the summer months, but I will flesh that out in a later post.

Experiment : Spend only cash from July 1st to July 31st. This includes everything except bills which will still be paid online or by check for lack of a cash alternative. At first, I thought I would still pay gas with plastic, but ultimately that defeats the purpose of the test. Shelling out 50$ cash to fill up will have a physiological impact.

I do not plan to budget at all, since we only do post spending tracking as it is. I want to try and replicate previous years spending conditions as much as possible. The plan is to have plenty of cash on hand to spend on anything we want, just like we did with credit and debit spending. We will save all receipts and I will enter them into Microsoft Money every weekend.

Analysis : I hope to show the effect that spending cash will have on different categories of spending and on the overall budget.

Post Experiment : I will report status throughout the month and then final wrap-up in August. If the experiment proves successful and doesn’t need a follow-on month, we will move to a cash only envelope system to test the added benefits of the extra planning and control.

» Filed Under Cash, Credit Cards, Experiments

Trackbacks/Pings

It's Hard Without Habits - July Cash Experiment Update | The Happy Rock on July 11th, 2007 1:27 pm
Principles In Action #1 : Treat Others Like They Have Value on August 8th, 2007 11:16 pm
Recovering From The Microsoft Money Server Upgrade on August 10th, 2007 2:21 pm
Cash Only Spending Experiment Analysis | The Happy Rock on January 9th, 2008 2:30 pm

Comments

5 Responses to “Save Yourself 18%? Cash Only Spending Experiment”

Kci15 (2 comments.) on April 16th, 2008 4:48 pm

The goal of the credit card companies is not to eliminate fraud, but to “reduce it to manageable levels”. This implies that high-cost low-return fraud prevention measures will not be used if their cost exceeds the potential gains from fraud reduction. *Edited by Moderator - Removed signature link.

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