Parting with cash forces you to take a hard look at your spending habits.

Sticking to an all-cash diet can help you to learn about your spending habits, change bad ones, and create a more realistic budget for yourself. It’s a great exercise in frugality and budgeting.

It’s a proven fact that parting with cash is psychologically more difficult than running a card through a machine. You spend less because it’s harder to physically part with your hard-earned money. Using cash forces you to consider: Do I really need this product or service? Will I use it? Would I rather have this product, or fifty dollars?

Going on a cash-only diet can be a great budgeting tool. Take out a predetermined amount of cash for a set amount of time- say, a month- and see if there’s some left over at the end of the month. It will force you to take a hard look at your spending habits and note areas where cuts can be made. For example, if you made your lunch at home instead of ordering carry out at work, you might be able to save a substantial amount of money. You might be frittering away your hard-earned dollars on extraneous goods and services, and paying for them in cash will force you to realize it. You could go pick up your pizza rather than having it delivered. Perhaps you could shop at discount retailers rather than spending more for the same product elsewhere. Maybe you could even give yourself manicures at home to keep your nails looking nice without spending an exorbitant amount.

Once you have determined what your essential expenses are, it will be easy to create a budget that accommodates all your needs. Budgeting doesn’t mean depriving yourself- you can factor in an amount of cash for discretionary spending after you’ve accounted for your essentials- credit card payments, car insurance, rent, and food, for example. Figure out the total amount you’ll need and keep the cash in an envelope. When it’s gone, it’s gone- don’t cheat by taking out more. This will force you to stick to your budget.

An all-cash experiment can be a huge step on the road to being in control of your finances, saving more money to meet a financial goal, or paying off your debt faster.