LWM

Why spend cash when credit & debit is easier?

Over the past few blogs I have shared budgets and envelopes as well as getting rid of those blasted credit cards and now I am going to try to convince you to only use cash for your purchases.

The downside to credit cards is you run up debt, the down side to debit cards is your drain your bank account faster then you can replenish the funds. Cash works differently, When you spend cash you know you have to stop when your hand is empty, in other words if you run out of cash you have to stop spending.

Let’s say you want a new portable GPS system for your Jeep that you can also use to GeoCache, you have shopped on line and found several for around $200 that you like. You have budgeted the money in your auto envelope or your recreation envelope (depending on how your mind works) and you finally have the $200. Now you go to your favorite electronics store and they have just the GPS you have been looking at for $195 but right next to it is the new generation on sale for $295 and the added features are not needed but nice to have, what do you do?

You buy the one in your budget! After all you only entered the store with $200 and you have already cut up or locked up your credit cards. It is so easy for us today to convince ourselves that we can afford the extra $95 and just add it to the credit card debt or spend the money from our checking account when we really need that $95 to save for our emergency fund or pay off existing debt (as a side note you really shouldn’t buy this kind of toy anyway until you have your fully funded emergency funded).

Cash is also a powerful tool in negotiations, when you walk up to a salesman and you ask how much something is they will tell you the price and then you whip out the plastic and take the item home, your new thought pattern should be that when they give you a price you pull a wad of cash out of your pocket and tell them how much you are willing to give them for the item. This will not work at Target but you might be surprised at how many places the salesperson can adjust the price to make a sale and cash has a lot more bargaining power than plastic because the store has to pay a percent of the sales to the credit card company just to accept your card.

I am sure many of you have seen the gas stations that list “cash price” on their signs and charge more when you use your credit card, my local AM/PM has a 45 cent fee to use the debit card but you can save the 45 cents by paying cash from your gas envelope and if you take your total yearly fill-ups x 45 cents each you can see how much money you save in just one type of purchase.

I can not even begin to tell you how many times I would pull out my credit card to make the wife or kids happy when we were out and about, now that I do not carry the card I am not tempted to purchase things at the spur of the moment and the envelopes full of cash are safely tucked away so there is no chance they are getting used. I carry $20 in my wallet for odd things that might pop up and I have my debit card if needed (and you should not need it) but I do not buy a thing that are not in my budget and that is why cash is king when trying to get control of your spending.

Feel free to send me a PM if you have questions or you can add them to the comments section if you feel others can benefit from the discussion.