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January’s just about over, but it’s never too late to make (and follow!) some great resolutions for new change in your life. How are those New Year’s resolutions working out for you? Many studies have shown that starting a diet and losing weight is one of the most frequently-made resolutions that people make. Today, I’m going to suggest an all-new resolution. Maybe you can start it for February! It’s another type of diet, and one pertinent to the type of topics that we discuss on this blog: finances. What I’m proposing is this: the All-Cash Diet. I read about this in a column on ABC News, and it really has stuck in my head ever since I finished it. Rather than counting calories or carbs, committing to a thirty minute run on the treadmill four times a week, or cutting out fast food – although these are all great things to do! – I’m going to challenge you to try something else: eliminating all plastic from your daily spending.

This particular “diet” is quite different from Weight Watchers in the sense that your goal is to gain, rather than lose – dollars, rather than pounds! You want to make your wallet as fat as possible, and you will beef it up slowly and gradually by making a major lifestyle change. Don’t be fooled, however – it involves just as much self-discipline and hard work as knocking off fifty pounds in time for your twenty-year high school reunion! This diet requires you to put away your credit and debit cards, and rely solely upon cash to get by day-to-day. That’s right: good, old fashioned dollars and sense. Instead of whipping out a card for every purchase, withdraw a budgeted amount of cash at the beginning of the week and make it last for the next seven days. It’s a cruel, but very effective means of impulse control. Don’t have the money on hand for something you want? You don’t get it! Run out of money on Wednesday because you splurged? Guess you’ll be brown-bagging your lunch and skipping that latte at Starbucks for the next few days. EVERYTHING is paid for with cash under this plan: your groceries, your snacks, the gas for your car, and that magazine you bought at the newsstand every Monday without really thinking about it. I guarantee that you’ll be taking a much-harder look at your personal finances by the end of a week or two.

Financial experts believe that paying for things solely with cash is an excellent form of impulse control for most people. It elevates folks to a higher form of budgetary discipline, since the results of slipping up are so much more tangible and hard to deal with. Spending your hard-earned tens and twenties has a much more “real” feeling to it than plastic, even your debit card. How many times have you swiped your debit for a convenience store purchase of less than two dollars? If you have only a large bill on your wallet, you will likely be much less likely to want to do so. This plan really makes you think more about the money you spend, and what you really “need.”

But Stephanie – I hear you asking – why my debit card? After all, credit cards are the real problem, right? My debit card is tied into my bank account, so that’s REAL money that I’m spending! Debit card usage isn’t a problem! This isn’t really the case, although this way of thinking was, for a long time, considered to be valid. Now, it’s beginning to be understood that frequent use of debit cards is just as fraught with issues and potential pitfalls as the use of their close cousins, credit cards. On any given day, how many debit receipts are escaping your pocket, stuffed in the nooks and crannies of your wallet, and/or being kicked around in your car? Many Americans who consider themselves to really have excellent financial habits are actually debit card addicts. They consider that using a debit card is good or their spending, since they can’t really make impulsive big purchases and sink themselves into massive debt like they could with their credit cards. But the real hazards of debit cards are small and insidious, not big and flashy.

Even if you meticulously keep track of your expenditures in your check book or with a personal finance program for your computer like QuickBooks, you could still be spending more money than you really should or would with cash. Sometimes it’s not really about knowing that you spent two dollars and thirteen cents on a coffee at 7-Eleven. Maybe it’s really about not spending that money in the first place.

Financial experts are now realizing something scary – that debit card users are actually more likely to overdraw their checking accounts. I read this in Consumer Reports, and I know it really came as a personal shock. And with non-sufficient funds penalties and bounced check fees topping thirty dollars at many banking institutions, this can quickly turn into just as large a financial problem as a high credit card interest rate. Debit card usage makes spending money easier. And while we claim to strive for convenience in all aspects of life as a society, it’s a known truth that making money easier to spend really means that we will just actually spend more of it. The New York Times found last year that American banks earned billions of dollars in penalties last year off small transactions that debit card users across the country did not really have the money to pay for.

Of course, the All-Cash Diet has some other benefits as well. By spending only cash for your daily purchases, you are doing your own little part to save your own favorite merchants from paying the ridiculous interchange fees that card companies charge them for accepting your plastic at the point of sale. The most complicated part of trying out this diet is really just knowing how much cash to withdraw every week. But experts claim that even if you end up withdrawing more than you really need, some psychological safety net should really minimize you spending too much of the excess. Give this plan a try for even just a month. You might be surprised at the results.