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.