Are you the type to “spend first, ask questions later”, only to find yourself in a hole at the end of the month? Many people are. How did I spend all of that money? One method to curb your purchase-happy attitude is to start spending cash instead of using your credit or debit card. While this doesn’t work for everyone (some people feel that if they have cash, they are more likely to spend it), it has slowed spending for many people, and could work for you.
Credit cards sometimes feel like free money. It can seem like there are no immediate consequences to using your card. It’s so easy and convenient! How nice! I walk in, grab what I want, swipe my card and walk out!
Of course, at the end of the month, the total lands in your lap like a bag of rocks. By spending cash, you are more cognitive of each purchase you make. A grocery bill of $56.87 actually means that you have to surrender over that amount of money. The price, all of the sudden, becomes much more real.
To many, a blinking number on a screen or a total on a receipt (that will instantly be tossed out) means a lot less than a thinning wallet. By swiping the plastic, you never actually see the money being taken out of your hands by a store employee. You never see your bills being tucked deep into the recesses of a register… never to be heard from again.
When every purchase is made using your hard-earned paper bills, you’ll see how easily $50 becomes $35, and how in the blink of an eye it shrinks to $31 and quickly down to $26… You’ll find yourself thinking, “I withdrew X amount on Monday. That should last me until next Monday.” You’ll be watching the total lessen and hopefully doing what you can to make that money last.
By mainly using credit and debit cards, you are less likely to acknowledge each financial hit. Often the only total you will ever think about will be the menacing one staring back at you from your monthly statement.
If you’re still skeptical, consider this study done by Dun & Bradstreet. They found that, on average, people spend 12-18% more when using cards instead of cash. Similarly, McDonald’s found that, when dining in their fast-food restaurant, the average card user spent around $7, when most cash users only shelled out $4.50.
Another deterrent to using cards is the added-on fees. Small, yet frequent, these costs can add up. Like a small leak in your boat, you won’t go down immediately… but over time some real damage can be done. Often gas stations and small purchases will require an additional fee if you are using your plastic. Why pay a higher price if you don’t need to? Card spending can also lead to expensive overdraft fees if not careful. Some banks charge transfer fees, too, if you make more than a certain number of transfers between accounts in a month. None of these problems are relevant when using cash.
If you’re ready to give the cash challenge a go, start with a trial run. Place a budget for yourself, maybe for a week, and take that much money out in cash. Throughout the week, you’ll notice where your money is going and hopefully be more conscious and selective about your purchases.
Have you ever tried this method of saving? Do you prefer cash or card? Let us know!
