The Happy Rock’s “Cash Only Spending Experiment” Analysis

I was just over reading The Happy Rock’s analysis of his cash only spending experiment that he started back in July. He and his wife (or girlfriend, I’m not sure which) went the entire month of July without using any plastic. Why? Because he was testing Dave Ramsey’s argument that people can save 12 – 18% by spending only cash. How Dave came up with that number is anyone’s guess (the same thing can be said for his “personal finance is 80% behavior and 20% head knowledge” saying*).

So did The Happy Rock save 12 – 18% during July? We don’t know because he never finished his analysis. Why? Here’s what he had to say about it:

The truth is that the no cash month [I think he meant “no plastic month”] was such a radical change in my habits that I was beat down by the end of the month. I didn’t have the energy to stay on top of things during the month and I was so discouraged at the end of the month that didn’t complete the analysis. I think part of me didn’t want to see that it saved money, because I wasn’t ready for the change. Another part of me wasn’t sure that I had been diligent enough in my record keeping to make the data meaningful.

I gotta say, I respect his honesty. Anyway, I have to hand it to The Happy Rock for giving it a try.

Personally, I think going all cash would be a pain in the butt. You can still cut your spending, you just have to be more diligent about doing it. For those who have SEVERE problems with overspending, then the cash-only option might be best as long as they stick to it.

*Incidentally, I asked one of Dave’s associates about Dave’s soundbite and this was his response:

“JLP, this is not really a quote that can be attributed. Dave never says “You know what they say…” or “Studies show that…” prior to making that statement. This is something that Dave has learned after decades of helping people with their personal finances. The point is that a lot of people can know the math of personal finances and still be broke if they can’t control the person in the mirror.

BTW, this is not an official statement on behalf of our company. It’s simply me answering a question that you asked.”

18 thoughts on “The Happy Rock’s “Cash Only Spending Experiment” Analysis”

  1. The 12-18% isn’t something that Dave has made up. He says where he gets his numbers and I’ve read and heard those numbers from multiple sources.

    I completely agree with his 80% behavior and 20% head knowledge as well. You can know all you want about finances but until you change your behavior to live within your means then your knowledge of finances is worthless.

    My wife and I went cash only to go against everything that we knew and force ourself to look at things in a different way. I use online banking for paying normal bills but for anything else (food, clothes, gas, eating out, school supplies, etc) it’s cash only.

    Going against your normal habits can be a real eye opener for anything. We didn’t give up like Happy Rock and gave it several months and it really changed things for us.

  2. This is an interesting experiment, but in my personal experiment, I would not spend 12-18% less. Why? Simply because I have the money in my wallet, and upon looking at it, am more inclined to spend it. I found back in my college days that when I had less money in my wallet, I would go out to eat less often and watch my finances more carefully.

  3. Esmo,

    I think the savings comes in the fact that people who use plastic typically spend MORE even if their budget is the same. Therefore, by using a budget and cash (and sticking to it), a person will save 12% – 18%.


    I don’t think The Happy Rock was doing this out of necessity, rather it was an experiment. So I don’t think he gave up.

  4. Why would you ever want to use cash only? Debit only is the way to go. Cash creates change, big waste of time.

  5. Thanks for the mention JLP. It was a major pain!, though I will try and tackle this one again with a little more preparation. I will let you know when I do.

    @Esmo – Isn’t that fact the you have a credit/debit card in your wallet like having almost thousands in cash available? If you have $100 at the grocery store, you can only spend a $100. If you are at the register and it comes up $125, you swipe a card and spent 25% more than you would have. I am not saying that it doesn’t work as you described, just that having free access to credit is sometimes more harmful than cash depending on the situation.

  6. I would agree with Esmo. If I have money in my wallet, I’m more likely to spend it. Of course, it’s also really dependant on individual habits. I hardly buy anything on a regular basis – no lunches, coffees, newspaper, magazines, movies, etc. So for me the cash only would be a pain and would pretty much be for groceries and gas. It’s the same reason I found the idea of the Latte Factor (Bach) to be not very useful, however I’ve heard many people say that it works well for them.

  7. Paying cash would not make me spend less; it would make me more careful examining the bill though. It is awfully easy to not pay attention to what is being rung up with plastic.

  8. May I offer another equally effective solution:


    Works for me. I really only go hog wild with spending when I either have to go shopping for a gift (which forces me into looking in stores or online) or if I have some time on my hands and I happen to be in the vicinity of some good shopping. Otherwise, out of sight, out of mind, don’t have time to go lookin for trouble.

    The cash thing doesn’t really work for me because its much harder to account for – “Golly gee honey, I just don’t know where all that cash went… I thought I gave you half of it”. But, the CC leaves an audit trail (leading right back to me), and I know wife will be reviewing the bills, allocating the expenditures to various budget buckets, and inquiring about suspicious looking transactions. That creates ACCOUNTABILITY.

  9. As usual, Miguel makes a great point.

    Cash is a lot harder to track. I have found myself saying the exact same thing to my wife.

  10. Here is a simple problem that destroys the credit card versus cash, over spending myth.

    Let’s say you own a car that has a ten gallon gas tank. Now lets say that same car gets 200 miles to the tankful, or 20mpg. If you are forced to drive it 400 miles a month, you are going to have to fill up the tank twice.

    How is using cash to fill the tank better than using a 5% reward credit card where the balance is payed in full at the end of the month?

    The obvious answer is, it’s not. Using cash in this scenerio is a mistake. If the price of a gallon of gas is $3, using cash costs you $60. Using a reward credit card, the gas costs you $57.

    That is why the theory of using credit cards makes you spend more is a myth. If the tank only takes so much, there is no way to overspend, which brings me to my point.

    What matters most is discipline, not the tool you use in your transaction. If you are disciplined enough to control your spending, a rewards credit card with the balance paid in full at the end of the month is your best option. If you go to the grocery store and your budget says you cannot go over $100, the undisciplined person brings only $100 in cash(the tank is full). The disciplined individual brings a 5% cash back reward credit card with a $10,000 limit and only spends $100 (filling the tank).

  11. I agree with Miguel. The best way to spend less is to STAY AWAY FROM STORES. Years ago we stepped off the consumer cycle and now we shop only when absolutely necessary, and we bargain hunt or buy second hand whenever possible. Online shopping can be quite tempting, however, and it takes great effort to resist that as well.

    I avoid cash as much as possible because it’s so difficult to follow the spending trail that way. We use our credit card as much as possible and pay it off every month, earning a 1% rebate that I often deposit directly into my Roth IRA that is linked with the card. I do keep close tabs on our spending by checking the credit card statements a couple of times a week – it’s a great way to keep track of how often you’ve eaten out, how much you’ve spent on groceries, gas, etc. Much better than cash.

    For those who can control themselves, credit card is king!

  12. From what I remember, Dave Ramsey was basing the 12%-18% on several studies, but he cited Tuskegee University as the author of at least one of the studies.

    Dave Ramsey indicates cash is best, a debit card second best, and credit cards are the worst, based on human psychology. Seeing the cash leave your hand for the cashier’s is a bigger impact than just sliding the plastic and looking at the numbers – for most of us, anyways.

    I also seem to remember Dave Ramsey himself uses a debit card as a credit card on occasion.

    In 2007 we’ve switched from credit cards to a debit card each, but we had so many other variables change that I can’t guarantee the 12%-18% drop in expenses from the switch.

  13. I spent January 2008 as an all cash month. Did I spen 12-18% less? Umm, no! I spent about 70-80% less. I hate spending at all!

    I became a cheapskate. I made my DH miserable, I ate out of the pantry because I refused to grocery shop. I spent less than 1/3 of our normal spending on groceries and eating out. The 2 categories we went to cash on.

    But all I did was use food we already had, so next month it’s likely we will be spending more to replenish our food stock!

  14. The no cash month depends on the person. My wife will spend whatever cash she has in her wallet in a day or two. She knows this. Thus she tries to keep no cash in her wallet.

    Her psychology seems to be that cash is “extra spending money” and that the credit card (paid off in full each month) is for regular purchases.

  15. @Andy – The thing I noticed is that I thought twice about how much driving I was doing when I was paying cash at the pump. I started thinking about making my runs more efficient by stopping at more stores, etc.

    Changing your commute length or car efficiency would be the ultimate change though.

  16. That is true, spending cash can be hard but sure worth it. As a college student I like to show up to pay my tuition with cash because it makes going to school that much more important to me than having mom and dad or the government giving me money to go to school. Good blog.

    -Debt Free Hispanic

  17. I love Dave Ramsey! He saved my financial life! When he states cash only,debit cards are included in this. He is simply stating to not use credit. I have changed my spending habits greatly since listening to him. I gave each of my three sons one of his books for Christmas a couple of years ago. The greatest thing we can teach our children is “Finalcial Peace”.

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