Do you have trouble keeping your spending under control? Do you feel like you never have enough money left in your bank account once your expenses are paid for?
If you answered yes, then I want you to try something different. It’s time you tried a classic and proven method for saving money. What is this?
Try going cash-only for a few weeks.
No, don’t even think about cutting up your credit card or debit card. Just put them away for now. Pull out the necessary cash a week or two in advance and pay for everything using this cold cash.
You can make this experiment easier by trying the try the Envelope System.
You put money money into different envelopes (i.e. entertainment, food, supplies,etc.) predetermined by your budget/income. Once you use up the funds in that specific envelope, then that’s it. You’re done with that money until the next cycle begins.
Or you can use cash any way you would like to.
Why does the cash-only-system works?
Handing over cash creates a barrier.
It’s difficult for most of us to hand over physical money. I don’t know about you but I find it 10 times easier to swipe a plastic card than I do handing over cold cash. I don’t know what it is, but there’s something about handing over cash that makes us just cringe. Swiping a plastic credit on the other hand is really easy. In fact, it’s too easy. Most of us have our credit cards saved with online retailers for easy purchases (Amazon for example).
It forces conscious spending.
You have to think before you spend your money. With a credit card you can swipe now and worry about paying it off later. Think about it. If you spend $50 right now on something, that’s fifty bucks that you can’t spend on lunch for the rest of the week. With a credit card you’re more likely to swipe now and worry later. And yes we’re all guilty of this one.
You have time to pay off your credit card balance. You’re not immediately on the hook for this money.
If you’ve struggled with overspending and compulsive shopping then this might help you change your mindset or force you to work on this issue.
You see real money leaving your pocket.
I know that money is money, but some of us need the visual evidence. We know were throwing money away when we swipe our credit card to buy random junk. We just don’t see any tangible results. The thought of getting a hefty credit card bill a month down the road just doesn’t scare most of us enough.
If you got your money saving under control then sure you can use your credit card to build your credit. On the flip side there’s the obvious trade-off that chances are using your credit cart could lead to over consumption. This is where the cash-only system fits in.
How can you start this cash-only experiment?
These are the steps that I follow every time I try this experiment out:
- Pay your main bills in advance because you don’t want to miss a mortgage payment (or car insurance).
- Decide on a time period (you can start with just a week).
- Plan your schedule ahead (you don’t want to miss your girlfriend’s birthday).
- See how your relationship changes when you only use cash.
Not all money saving tips are out of this world. And yes I omitted the benefits from building credit by using your credit card and being able to keep track of your debit card spending easily via online banking. Don’t worry. This is just an experiment for those that can’t seem to get their spending under control.
The envelope system works great for a few friends of mine that have a problem with spending. They’ve come over for dinner a few Saturdays when they found their envelope was empty…
My husband and I put absolutely everything on our credit card and I literally type every single expense into an Excel sheet budget. It works as well as cash for me since the more we spend, the more I have to type…
Personally, I have noticed that I also overspend with cash. I find that both credit cards and cash cause overspending. I find that using my debit card is the best for sticking to a budget!
When I have cash in my pocket, it tends to burn a hole in it 😉
When shopping for groceries, I am more likely to spend more. For example, typically I might spend only $20-$25 per visit to the grocery store when using my debit card. However, if I have $50 in my pocket, I’m more likely to spend $35-$40. I end up splurging just a little more, buying something a bit more expensive, etc.
I also have a long-time friend/roommate that prefers a cash-only lifestyle. He is in a similar economic situation as I am, but I notice he splurges quite a bit more than I do, which I attribute to the cash. Actually one of the reasons he sticks with a cash-only lifestyle is because he feels that rich people always carry cash! Ironic..
Personally, if I need to use credit, I typically load money into my checking account from a line of credit. Rather than spending from the credit card at all, this helps to control any overspending.
Best thing we did to save money was to have $200 from each bi-weekly paycheck deposited directly into a credit union savings account (which kept us completely out of the process). We started back in 1995. It’s difficult to get the money out since it was before online banking was all the rage and it was a good half-hour drive to the bank. I still don’t know if I can access it online and haven’t cared to find out.
Barriers work!
Now I’m going to try what others have suggested by having DH’s check put directly into ING savings and transfer out just what we need for our biggest spending priorities.
This is a great strategy!
If you don’t have enough free cash to start this up, you know you need it! The great thing about it is that it’s fun without a bill hangover. You spend until they money is gone, and then you quit. You get stuff and have the joy of knowing you won’t be paying for it next month or next year. If somebody wants you to do something with them and you don’t have the money you answer honestly — sorry, I’m short this week.
Obviously some things have to be paid electronically or with a check. Most landlords don’t want cash. So breakout what bills need to be paid that way, and see what’s left. Then take that out of the bank. It puts your purchases back in persepctive.