What does “Living on Cash” mean?
Living on cash means we use cold hard cash for most of our spending. We’ve said goodbye to credit and debit cards and live solely on a firm cash budget for all of our discretionary spending.
Full disclaimer—we do each still have a credit card in our wallet. However, we both travel for work, so we use the credit cards for work related expenses only. We do make occasional online purchases as well, and this requires either a credit card or at least PayPal. When we do make an online purchase, we take the cash from our allowance and put it aside to pay for the credit card charge.
Why did we decide to live on cash?
Earning money while working full-time in our 30s produces predictable income. We won’t have this same income in our retirement years. Retiring in our early 40s, requires my husband and I to budget well now. Preparing to live on a fixed budget, similar to the one we’d have in retirement, is something we are attempting to do right now.
Having only a set amount of money each month forces us to cut down on our discretionary spending and focus on only buying the necessities.
How much do we live on per month?
By researching the countries we plan to retire in (Nicaragua, Belize, Ecuador, Honduras, and Costa Rica), we discovered that $1100 per month can make for a comfortable living. Based on this, we set our monthly cash amount as $1080. That’s right, we are living on only $1080 per month to cover all discretionary spending. This was a test amount to see if we could live comfortably. We are in month 3 of living on this budget and so far, it’s been incredibly successful.
How does it work?
We automate our money. It’s a small time investment to put together a budget and set up your direct deposit settings to automate your money. Pay yourself first!
We use my husband’s paychecks for our monthly cash spending. To make sure we stick to our cash budget, every time he gets paid, we take our allotted amount of cash for the next two weeks. Putting only the full amount we are allowed to take out ($540 bi-weekly) into our checking account keeps us in check and prevents us from going over our monthly budget.
Every two weeks, when my husband gets paid, we each withdraw $270 to buy the items we need and want. That’s a total of $540 for the two of us to live on over those two weeks. Sometimes one of us will spend more than the other so he may give me $40 from his $270 and vice versa. So far we’ve had no issue buying items for dinner, getting haircuts, and going out with friends on this budget. If there is a large ticket item, we need to save our cash for it out of our allowance. At the end of the month, we take anything we have left over from the $1080 and instead of rolling it over into the next month, we put it into a “petty cash” box to save for any big-ticket items that come up. For example, over the last two weeks, we only spent $484 between the two of us, so we put $56 in the “petty cash” box.
What’s covered by our Cash Budget?
This monthly cash budget of $1080 is meant to cover all of our discretionary spending. That means everything that’s not included as a necessary expense. This includes:
Yep, this includes all the food we need to buy for the month. This has forced us to plan meals and not buy more food than we need, especially fruit and produce. We tend to buy food on a nightly basis, walking to the local grocery store, and then buying the food needed for our nightly meal. This helps us portion our purchases.
The pups need food too, but Blondie also needs grooming and Kiwi needs toys. The dog goes through so many tennis balls! We found a little dog shop here in Denver called Sherlock Hound that is half the price of big box retail pet stores and mixes their own dog food. It also keeps our money in local shops, which we love. Our girls have eaten from Sherlock Hound for over three years now and are happy, thriving pups.
We have the normal expenses like toilet paper, cleaning supplies, replacement towels, etc. We tend to buy whatever is on sale at the store to save on expenses here.
This includes eating out, concerts, sporting events, girl’s nights, etc. Entrance fees for events like races also fall under here. Splitting meals and using Groupon to get discounts on activities have helped cut costs here.
Toiletries and makeup.
Shampoo, conditioner, deodorant, sunscreen, and mascara all fall under this category. I don’t use products that are tested on animals so my items tend to cost a few dollars extra. I’ve learned to buy these items when they are on sale and have been using Elf Cosmetics to buy my makeup.
Haircuts and waxings.
I absolutely love getting my eyebrows done. Haircuts always feel nice too. Just because we live on a budget doesn’t mean we want to look like shaggy beasts.
Any new clothes.
It doesn’t matter if the clothes are for work or wanted because they are just plain pretty. They still come out of this budget. It’s taught me to repurpose some of my wardrobe and pull out some items I haven’t worn in quite a while.
This could be new running shoes or a new tennis racket. We recently bought a basketball and that came out of this budget as well. Buying new sport goods is still cheaper than a gym membership.
If it’s not for a birthday or anniversary, it comes out of this budget. Recently, my husband surprised me with a bottle of one of my favorite bottles of Belgian beer, Cantillon. So delicious!!! It’s rare and costs $30 for a 750mL bottle, but to me it’s worth every penny. This little surprise came out of our cash budget.
If we decide to drive up the mountains and spend the weekend there, this comes out of our $1080 cash budget. We are learning to enjoy camping even more on this budget and are learning how to find some great AirBnBs!
What’s not covered by this budget?
The monthly cash budget of $1080 doesn’t cover:
Our home mortgage.
We recently became landlords as part of our master plan, so this expense is covered by our renters. I’ll post more on our land-lording adventures in future posts.
Our car loan
Currently we have two car loans. We will be selling one soon to cut this down to just one loan. We are selling my beautiful blue Volvo, named Sven. I’ll be posting more on how we are reducing our monthly expenses on living on one car in upcoming posts.
Car and home insurance.
Prescriptions and/or physician appointments.
Our health insurance and Health Savings Account (HSA) cover these expenses. As another retirement investment strategy, we max out our HSA!
Birthday, holiday, and anniversary gifts.
These are purchased from savings and generally don’t break the bank. We tend to buy each other experiences and not large pieces of jewelry or expensive items. For example, two friends and I have husbands with birthdays within a few weeks of each others. So, we surprised them with a party bus to local breweries with a bunch of friends. Last year, for my birthday we went go-karting and mini-golfing with some friends. This year, for my birthday we had dinner at my favorite Italian restaurant with a group of 15 friends.
When I worked as a nurse for seven years, I worked every Christmas and never got to go home. So my husband and I created our own tradition of driving to see Christmas light and then going out for a nice steak dinner right around Christmas. Even though I haven’t been a bedside nurse in over 4 years, we have continued this tradition. It was one of the few items I refused to give up when we decided to live on cash. This meal is covered by our savings.
Retirement exploration trips.
These are covered out of our savings but have tight budgets associated with them. I had less than $1000 to spend on Belize and managed to make that trip happen without a problem for less than $800. Finding travel deals is a fun hobby for me so I’m always up for the challenge. Our next trip is looking like a one-week visit to Costa Rica and I have a $1200 budget for that trip. I think this should be pretty easy to keep under budget.
Can someone really have fun on that budget?
The short answer is yes.
There’s been many times in my life when I really didn’t have any money. Not because I was on a budget, but because I really was living paycheck to paycheck. I was the poor college student. Selling my plasma and participating in focus groups was what I routinely did to earn extra income during my college years. I continued doing this for several years after college while we paid off loans. Even though I didn’t have much money, I still had a lot of fun back then. And I still do now.
A lot of people think $1080 per months for two people to live off of sounds incredibly low and that we won’t get to do anything fun. Quite frankly, that’s ridiculous. What this cash system is doing is making us think about how we are spending our money and finding alternative fun items to do. For example, instead of going to a brewery and having three beers at $5 each, my husband and our friends can each buy one bomber of beer and then do a bottle share. Equally as fun, but half the price.
Prioritizing does come in to play. Maybe I skip going out for wine one night so that I can go out to dinner later in the week. Or my husband and I split a meal when we go out to dinner instead of each ordering our own. It’s not a horrible sacrifice and even introduces portion control in restaurants!
What fun things have we done on this budget?
In the three months since we have started living on this budget, here’s a list of the things we’ve done without breaking our budget:
- Hiked to a castle in the mountains
- Attended two Rockies baseball games with friends
- Strolled through the Denver Chalk Art Fest
- Participated in several BBQs with friends
- Had several girl’s night out full of wine and appetizers
- Went line-dancing
- Hosted a baby shower
- Sipped a variety of beers at a bottle share
- Romped with the dogs in the Rocky mountains
- Competed in a 5k
- Visited the ghost town of St Elmo, CO
- Camped off-road on Tin Cup Pass
- Attended a roller derby
- Played several rounds of basketball
- Played frisbee in the park
- Splashed in my friend’s hot tub
- Got my grandma’s ring sized and fitted (May not seem fun, but it was so important to me!)
We are continuing to have lots of fun without breaking the bank. In further posts, I’ll share how I’ve saved costs on some of the above items and describe some of my “Red Headed Hacks” for saving money on travel. The tricks I’ve learned along the way have allowed us to have fun on such a slim budget.