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I have a strange relationship with cash. This month I spent cash exclusively — no credit or debit cards in April — because I was curious if it would change my habits and reduce my overall budget. Turns out I learned less about budgeting and more about the emotions triggered by using cash.
In the past, I relied heavily on credit because I spend cash quickly. I don't like going to the ATM and I feel unsafe carrying gobs of bills. I pay off my credit card bill each month and I earn rewards charging everything I buy. (Remind me of the virtues of cash, again?)
Then a close friend experienced what many studies have shown — that people are more reluctant to spend cash than credit. Was the same true for me? I couldn't get the question out of my head.
So, I hid my credit card in my jewelry box and hit up the ATM for $500. The money disappeared quickly at first, then I sobered up and only put in my wallet what I intended to spend. Deciding what to buy before I left home did wonders for my budget.
I still have a grudge against cash — it's messy and makes individual purchases harder to track — but after using cash exclusively for a month I appreciate it more than before.
With cash, I'm more conscious of how my purchases add up. I contemplate each item because I'm hyper-aware of the fact that what I buy today takes away from what I can buy later. With credit, that seems less true. I'm also scared of putting more into my cart than I can pay for. How embarrassing to not be able to pay the cashier! This means shopping takes a few minutes longer, as I add up the cost of everything in my cart, but it makes it a cinch to stick to my list. During one grocery trip, I took two items off my list even though I had enough money to pay for them.
Most of my big purchases, like a plane ticket to New York City for my sister's graduation, are unavoidable. But the small purchases, like whether to order another drink at the bar or stock up on groceries, have wiggle room. Using cash makes me more likely to wiggle my spending downward.
Cash is simple. It's easier to remember my total spending by adding up ATM withdrawals than to mentally tally everything I charge. If I forget where I am, I can add up my ATM withdrawals online in less than a minute. This means I'm less worried that my spending is getting out of hand.
Credit card perks don't add up that quickly. During the past seven months, I earned an average of $16 per month on my cash-back card. But, by using cash, I spent $200 less than I normally do with credit. My belief that credit cards earn me free money was misguided — at least this month.
Almost everyone takes cash, though there are exceptions. Some airlines don't take cash for in-flight purchases of snacks and drinks. Rental companies often require a credit card to place a hold in case you damage or lose the equipment. The prospect of being shut out of renting a snowboard on vacation because I was not carrying plastic made me feel inadequate. Luckily, a friend covered for me and I returned the board in one piece.
Big purchases are easier with credit. With plastic, I don't have
to stuff wads of bills in my wallet and ask the cashier to count out huge sums. (I swear, I'm not in the mob!) If I lose my wallet, I have no recourse other than hoping an honest soul returns it untouched. With credit, I am well protected.
So, how does my new relationship with cash add up?
I'm on track to spend 16% less than I spent on average in the past three months with credit. I'm not going to give up my credit or debit card entirely, but I won't use them as often.
Cash, as it turns out, makes a damn good partner.
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