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Jane Clark's money jars in Toronto on June 19, 2012.

Deborah Baic/The Globe and Mail

I thought I was ready for some tough love, but living plastic-free was a far bigger challenge than I ever expected. To help myself along, I adopted Gail Vaz-Oxlade's three-pronged regimen. The financial guru and host of Slice Network's Til Debt Do Us Part, asks the couples she counsels to start by living strictly on cash for an entire month. So that's what I attempted.

Hiding the debit and credit cards, though, is just step one. The others are 2) creating a strict budget and 3) recording every purchase.

I bought a small notebook to act as my spending journal. I dug up three months of credit card and bank statements and tried to come up with an average weekly amount for each variable expense, figuring this would work as a spending analysis and budget.

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I then rinsed out some "magic" cash jars and labelled them with Gail's Big Five expense categories: Food/Personal Care, Transportation, Clothing and Gifts, Entertainment, and Other, then loaded each one with a week's worth of cash.

This worked out to $62 for food and personal care, $66 for transportation, $22 for clothing and gifts, $33 for entertainment, and $35 for other.

On the first of the month, I withdrew cash for two weeks. I divided enough for one week among a set of envelopes in my purse, but I'd hit my first snag. I didn't have the right change to split the amounts exactly. I made change from the cash in my wallet and borrowed more from the following week's jars.

It was Day One, and I was already deeper in debt.

For exactly 11 days, I dutifully recorded each purchase, including the notebook ($1.70). But I was often in a rush, so I stuffed receipts into the envelopes for transcription "later." Then on Day 12 I changed purses and forgot to transfer my notebook.

On grocery day, I normally buy a cartful that lasts a few weeks, so I'd loaded the Food envelope with two weeks' worth of cash. I'd also been dipping into it for items such as a $5.07 Tim's take-out lunch, a $24.65 prescription refill and a $4.99 carton of milk. At the checkout, there wasn't enough cash in the Food envelope to cover the $106 tab. I scrabbled through the other envelopes to try to make up the difference, but there were four people behind me, fingers impatiently drumming on the conveyer belt. I panicked and pulled out the debit card.

A friend and I registered at the last minute for a large out-of-town conference. We needed a hotel, and space was booking up fast. I nabbed a double room at a Best Western for $224.87 for three nights. Cash was not an online option. Out came the Visa.

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The day before I left for the conference, I lost my glasses. I wandered through the opening-night reception in my prescription sunglasses, trying to project an air of mystery. It was off to the mall for one-hour replacements ($226.59), but there was no jar labelled "Emergency Eyewear."

Three weeks in and my jars were empty, my budget was in tatters, and my credit card was swollen with new charges.

What's more, using cash exclusively often gave me an unexpected feeling of shame while I was standing at the register. There's something about the extra time and effort of counting out cash that has come to reek of low status. Does everyone assume that paying in cash means you did not qualify for credit? I did, and felt humiliated when I handed the last three items back to the cashier.

I turned to Ms. Vaz-Oxlade for help. "There's no shame in cash," she scolded. "The fact that we have been bamboozled into thinking that plastic carries more prestige than cash is ludicrous!

"Plastic has the connotation of debt that cash can never have. So any time you see someone using plastic, what should be going through your head is either: 'They've really got themselves together because they know how to use plastic properly,' or 'Poor things, eh? They don't have any money.'"

Clearly, there's more wrong with my life than debt, but my own future looks grim if I can't get my finances under control.

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First up is the budgeting issue. "People routinely choose budget numbers based on nothing," Ms. Vaz-Oxlade points out. "They don't know how much money they're making. They also don't how much they're spending. And part of the reason is that they're closing the gap between what they think their income is and what their income actually is using credit. Credit is the illusion of income, but it's absolute debt."

To craft a meaningful budget, job one is to do a thorough, honest and rigorous six-month spending analysis. Check your debit-card transaction history. If you're allocating $200 a week for groceries but picking up another $100 worth of take-out lunches and coffees, your books won't balance. "The spending analysis provides an awareness of what you have been doing with your money," says Ms. Vaz-Oxlade. This awareness is essential to changing your behaviour and cutting your spending.

How do you create a workable budget, especially if you have an inconsistent or reduced income? Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, Inc., suggests approaching the issue as if you were preparing for retirement: by carefully considering your needs vs. your wants, and paying off as much debt as possible. "Debt as a regular expense is the least efficient use of your money," he explains. "You want to try to get to a point where you're only spending money on what you need."

Ms. Vaz-Oxlade agrees, explaining that in her three-tiered, A, B, C budget system, debt repayment and savings are included in "A," or "must-have needs." This first tier includes essentials such as rent, food and transportation. The "Bs" include the nice-to-have needs, say, basic clothes or additional money for food. Any extras go into the "C" category.

Once you have grouped your expenses, you need to budget a month ahead, so that July's income covers August's expenses, and always maintain a running balance in your spending journal so you don't spend what you haven't made.

To determine your income, Mr. Schwartz recommends using last year's tax return and dividing your net income to find a conservative average monthly amount. "Err on the side of less vs. more," he says. "You have to be merciless: If you end up in a surplus position in any month, it doesn't mean that you've won the lottery. It means that you need to put it toward the debt."

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How do you deal with unexpected budget-busting expenses, such as new glasses? Ms. Vaz-Oxlade advises opening a "curveball" savings account, and depositing small amounts whenever you can. It may not cover the cost of that blown transmission, but it might make up the difference between this month's car maintenance fund and what the repair actually costs. The more invisible those funds are, the better.

"Don't wait until tomorrow," says Mr. Schwartz. "If it's a dollar a day, if it's emptying the change out of your pocket, start to put money away and don't touch it."

Mr. Schwartz notes that a small automatic paycheque deduction or transferring 10 per cent from every cheque you deposit is ideal. "You will make do with what you have left," he says. "People always do."

My month on cash also taught me about many of the less tangible aspects of money management. As Ms. Vaz-Oxlade explains, money is a tool and a medium of exchange, but it's also loaded with emotion. We have trouble dividing how we feel about our money from what we do with our money. My poor financial habits are just that, bad habits, and if I'm going to break them the way people stop smoking, I'm also going to have to think about the emotions I associate with plastic. So, as my guru says, I need to recognize my emotional triggers and instead of feeling ashamed about paying with cash, be proud I'm on my way to a debt-free life.

Special to The Globe and Mail

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