By FPA member Lisa A.K. Kirchenbauer, CFP^®, RLP^®

Last Updated: April 2, 2012

With tougher times, and for a variety of other reasons, more people are deciding to stop using credit cards and live on a “cash basis.” Here are 10 steps to help you reduce and/or eliminate your dependency on credit cards and move towards a much more financially stable lifestyle on cash.

1. Try to build an emergency fund of at least $1,000. More is better to cover any unexpected/emergency expenses without pulling the plastic.
2. Stop using the credit cards, as soon as you can, and start using cash/checks/debit card.
3. Try to secure overdraft protection/line of credit with your checking account to give you a cushion as you make the transition.
4. Detach all the automatic debits you have to your credit cards.
5. Most important: Develop a “zero-based” budget where you are able to budget for and track all expenses each month, the goal being to have your income exceed your expenses, not the other way around. It may be a bit challenging at first, but over time it can get easier.
6. Take steps to reduce expenses and look for additional income if you are coming up short. (Ideas: call the phone/cable companies to see if you can get lower rates, have a yard sale, cut coupons, shop smart at warehouse-type stores, barter with friends, do some part-time work, and the like).
7. Try using Mint.com as a tool to help you track your expenses real-time, put your budget online and watch your ability to stay on budget in each spending category.
8. Just say “no.” N-O to the things that you really don’t need, and are getting in the way of you having a more financially independent future.
9. Get the family involved in the expense reduction effort. Kids can be surprisingly resourceful and it can almost be a game saving money! Including them in this process and, if age appropriate, explaining why you are making the changes could have a profound impact on their future as well!
10. Continue to build emergency savings since we never know when the car repair/hot water heater/big medical bill might come.  

Once you have things under control, be sure to build in longer-term savings for education and retirement. Automatic savings is always a great way to make sure it happens and is in the “budget.” By making this change, you will find yourself being much more conscious about the choices that you make with your money. You’ll cut better deals, spend less and value what you have bought/spent with your hard-earned money even more. It can be freeing and rewarding to live on a cash basis. Showing your children another way of living could be one of the best gifts you ever give them!

FPA member Lisa A.K. Kirchenbauer, CFP^®, RLP^®, is the president of Omega Wealth Management.