March 9, 2012

Sharing the Wealth: Give cash a chance

Almost any money saving expert will encourage you to use a cash only system. I have always thought "This might work for some, but it's not for me". After all, I tend to spend cash in my pocket! But I also kept seeing posts from people who didn't think cash would work for them but saved money once they tried. So, I decided that it was time I gave it a try.

Now, they do suggest to use cash for everything. For now, we are just doing it for groceries. I honestly didn't think it was going to work. I had even already planned out depositing the cash back into my account when it failed. But, I tried it. And you know what? It worked. I actually came in considerably under my grocery budget for the first time in a long time.

Here is what I discovered:

-Cash really does "hurt"
  The money experts will tell you that you will monitor your budget better with cash because it "hurts" to spend cash in a way that isn't true with a debit card or checkbook. I actually didn't find this all that true at first. As I had feared, I found it easier to spend a dollar here and there because I wouldn't have to face it later in the bank account. Where I "felt" the spending with cash was my first, it didn't hurt like they said it would. Where I found the "hurt" was toward the end of my budget. I found myself making smarter choices when I realized that a more expensive purchase would mean breaking that last $20 bill, and I didn't want to do that!

-It isn't as easy to "steal" from other budget categories
    This is probably where I saw the biggest difference. Ever since we started keeping a closer eye on our budget I have been keeping track of each dollar we spent. But if it went over, I would just move it over from another part of our budget. With cash, that isn't really an option. If I want to steal from another budget category, I would actually have to go withdraw more cash or use my debit card for something I know I shouldn't- which is much more difficult than moving over numbers in an excel file!

-I didn't feel as uncomfortable carrying cash as I thought I would
     One thing that kept me from trying cash for a long time is that I was terrified of losing it. I can be a little lot forgetful, so I was really nervous that I would leave it somewhere or it would get stolen. As it turned out, I wasn't as nervous as I thought I would be, though I was still a little nervous. I keep my grocery cash in a separate case in my purse so I can just carry that part in. It was so nice to not lug around my huge purse! That part actually made me feel more secure because I could keep my cash in my pocket and not have to worry about my purse lying open in my cart while I price compared (which can get me rather distracted).

If you still don't think cash is for you, we have a "modified cash method" (I think I coined this term, but I am not sure) for our "miscellaneous" expenses (those random expenses that come up that don't fit into another category). Since this was another area where we had problems monitoring our spending, I wanted to do something about it. But, I needed Shaun to have access to it while traveling. So, instead of doing cash, we opened a bank account specifically for these funds and just transfer the miscellaneous part of our budget over. It makes our main bank account much easier to keep up with and we are definitely more conscious of our spending since we know that once it is gone, it is gone.

My final word of advice to you on this topic: Even if neither of these methods work, if you are using credit cards for all your purchases, MAKE SURE IT IS A GOOD CHOICE. I know those rewards points seem nice, but using your credit card for everyday purchases can be dangerous. I know there are some people who are disciplined enough to subtract it from their bank account so they can pay off the full balance every month and not spend money they don't have in their bank account. But, if you aren't one of those people, make sure that you are making a good decision for you financial future. Those rewards that earn you pennies on the dollar seem nice, but they aren't worth the cost (or stress) of hundreds of dollars-or more- of interest.

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