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I’ve gotten a lot of questions from readers about my month-long cash-only experiment. Why am I only spending cash in April? What is the goal? Did my “emergency” mattress purchase come from savings or the regular budget? How much money do I have left to spend this month? Answers below.

Q: Is the mission of your cash-only experiment to find out how much money you need to live on per month? How much you want to live on per month? Or some combination thereof? – Concetta

A: Neither. I know how much money I have to spend after bills and savings every month. And most months I’m good at staying within the limit I’ve set for myself.

Q: Is the point just not to use credit? Or is it more about how to use credit smartly? – Concetta

A: Yes and yes! I usually rely on credit heavily because I spend cash quickly, don’t like going to the ATM, and prefer not to carry gobs of money. But studies show people are more reluctant to spend cash over credit. An NPR story from 2008 says psychology is responsible. I was curious if spending only cash would change my habits and reduce my overall spending. In the process, I’m learning how to use credit smartly.

Q: Part of an exercise like this is to be able to defer those expenses until they do fit into the budget. Is the point of this to simply pay cash for everything (no matter if the budget is met) or is it to begin the process of defining wants from needs? – Janet

A: Yes, the point is to pay cash for everything, even major purchases. In my book, defining needs versus wants is unrelated to how you pay for them. Instead, defining needs versus wants is about sitting down with paper, pencil, and a calculator and creating a first budget. Once you have taken into account regular bills, irregular expenses, and fixed expenses, you will know how much money you can actually spend each month on fun stuff like meals out, movie tickets, and clothes.

Q: What happened to the mattress!? – Sarah

Back story: I put off buying a mattress for so long that after three sleep-deprived nights I had to start sleeping on the couch or shell out for a new mattress. I chose the latter, seeing how the couch is covered in dog hair. From browsing mattress sale flyers, I knew I could get one for under $1,000. I researched coils, padding, and natural fibers online and realized only two things mattered. Was the mattress comfortable? If so, did it fit my budget? A good friend highly recommended IKEA and from the website I was confident I could find a mattress within my budget, less than $500.

A: I went to IKEA, found a comfy mattress within budget, and lugged it home with the help of a burly friend. I’m sleeping easy, but debating whether the $533 mattress should come out of my monthly budget or savings? I tossed around the pros and cons for a week, asked readers to weigh in, consulted friends, and decided the mattress will come out of my savings.

Here’s why. I have ample savings to cover a big last-minute purchase like this. Even though I put off the mattress purchase until it became an emergency, for weeks I had been mentally preparing myself for the big purchase.

Q: What I want to know is how you researched this mattress for the features you wanted and price before spending the money. For example, did you consult Consumer Reports? Tell all, BB. – Diane

A: See above.

Q: So how much money do you have left to spend this month? (I submitted this one!)

A: My target spending was $1,200 for April. If that number seems high, hang tight. I’m writing a future post about my budgeting system and why my so-called discretionary spending is higher than other budgeting systems. So far I’ve made three ATM withdrawals totaling $1,200, but the $533 mattress came from savings so I have $667 left to spend this month. Not bad!

Tagged: budgeting program, cash only, emergency purchase, emergency savings, mattress, money, monthly budget, no credit, no credit cards on Monday, April 19, 2010 · 8 Comments »