A couple of years ago a young friend of mine approached me to help him assess what it would take for him to save enough money for a down-payment on a house so that he could move out of his parents’ home.  He made a decent living and was earning a pension.  His generous parents were not charging him rent or making him pay utilities, and he did not have student loans.  Great!  He should have a mountain of money saved up in the three or so years he was in this living situation, right?

No.  He had nary a penny saved and was living paycheck to paycheck.  What he did have, though, were two bad habits. And before you go guessing his second one (since I assumed you read the title of this article and deduced the first), no, it wasn’t using twenty-dollar bills as wallpaper…   It was buying new cars every three years and having the dealer just take over the payments on his “old” car.  And from the new car smell lingering on his clothes as we spoke, I knew I couldn’t do anything about that habit in the near-term, but I could help him with his other bad habit – dining out.

How bad could it be?  Well, I looked at his past credit card statements, and since he used his card for even the most minute of purchases, I knew to the penny how much he spent on eating out, in convenience stores, and at every doughnut shop in a 5 mile radius.  It was about $1000 a month.  Annually, this equated to almost a third of his net income.  I know what you’re thinking… but no, he was not a competitive eater in training.

It really does add up

Now before you go judging him, this really doesn’t take much, and if you added up how much you spend on eating out, it might be higher than you think.  In a 31-day month, this would breakdown to about $32.25 a day.  If you eat lunch and dinner at even modest sit-down restaurants, this would not be an unusual daily tally, especially if you add in things like your skinny vanilla latte routine.

My friend’s enabler, as it is with many others, was his too-easy-to-swipe credit card.  On his four-page statements I frequently saw charges for a buck or two made within a couple of hours of each other.  And since he carried no cash, this also enabled his third bad habit of picking up the check for everyone who ate with him.  You’d think that his friends would occasionally return the favor, but I think they assumed that he had the long-term memory of a goldfish to keep eating for free.

Time for a drastic solution?

So the solution is simple, right?  Stop eating out.  But I knew that wasn’t the answer for him.  First, it’s very hard to just stop doing anything cold-turkey.  Second, it would affect too many other aspects of his daily routine all at once.  We needed something easy to keep track of and easy to stick to.

So I told him to only use cash for food and that he’s only allowed to visit the ATM for this cash once a week… to make it a part of a routine.  At first we set the amount relatively high – $200 a week.  We chose Friday because he did a lot of his big meal purchases on the weekends, and it would him allow him the choice of blowing it all in a couple days and have to eat at home the rest of the week or to portion it out.  I told him that I would ask him every now and then if he’s sticking to the plan because it was important to have accountability.  Gradually we would decrease the amount of the withdrawal until his spending was curbed.

Can’t argue with results… sort of.

Well, the plan worked even better than either of us thought it would.  Almost immediately he dropped down to about $100 a week and kept falling from there.  Eventually he saved enough to put a down-payment on…  a motorcycle.  Sigh.

Modified Envelope System

I know this is similar in concept to the “envelope system” of cash-only living, but I think you have to be very disciplined to really make that work holistically.  I think by using cash on only the largest discretionary spending habit you have it makes it easier to focus and keep going.

The key to this is keeping accountable.  You could add consequences if they make an extra trip to the ATM such as reducing the following week’s allowance by 50% of the overrun… or that they have to eat beef tongue sandwiches all the following week.

As society is becoming more and more cashless, this will be harder and harder to do.  In an economy essentially driven by discretionary spending, there will always be a pull to make spending easier.  The secret is to make it personally harder for you so that you’re not sacrificing your economic security for the sake of society’s.

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