Before I started budgeting, my attitude about cash wasn't the same as it is now. I liked cash but thought it was bulky and uncomfortable so as a result, I never carried it. That all changed when we started to have budget items like an allowance. I still think it's bulky but it forces me to stop and think before I spend.
Now my wife and I carry cash for certain budget items. Those include: entertainment, household, groceries and our allowances. Most everything else is a bill that gets paid by check or automatic withdrawal.
Savings
Shortly after we started budgeting we realized that buying things with our debit card caused us to overrun our budget. The groceries budget item in particular was the worst. My wife and I decided to take 75% of our grocery budget out in cash every pay period. Then, once a week, we both would go to the store and do the shopping for the next week. It became something we both looked forward to as it became a sort of strange date. This really helped us.
We are a nation of in-debt consumers so saving money to purchase big ticket items to many people is a foreign idea. Many times these items get purchased on credit. Cash can help you break that habit by allowing you to conserve money in a budget item and on the next pay period, place the excess that you saved into an account for that new TV you wanted. It's a great habit to get into and can rid you of the temptation to use credit to purchase those items.
It's Emotional
Using cash for some items makes you focus on conserving. You tend to consider each item more carefully when you have a finite amount of something you can touch that you know you're going to have to hand over in exchange for these items.
Tying more of your senses to a purchase can help you hold on to more of your cash. Debit cards don't have that same emotional effect. With a debit card, it's just a number and a single piece of plastic. Most everyone would love to have big stacks of cash that they could call their own or would love to roll around in a pile of money. Why else would movies show those images all the time or some casinos put in cash booths where bills are flying around for you to catch? They do it because it draws you in. Draw yourself in to becoming more of a saver of cash by taking advantage of that psychological impact.
Cash Isn't Safe
I've heard this argument before and I would say that in some instances that would be a fair assessment. I don't typically travel during my vacation with my whole vacation fund as cash in my wallet. This is one of those occasions where you're better off with your debit card and a small amount of cash at any given time.
Having said that, when you have a planned occasion for spending such as groceries or a date night, carrying cash is no more dangerous than anything else. A thief is not going to know if you have paper or plastic. I know you can cancel your debit card before any money is taken from your account but this is a rare occurrence and in my mind the amount we save outweighs the risk.
So, if you overrun a budget item frequently, try taking it as cash and working with it in that way. You might find it helps you save for that next big ticket item.
Sticking to a budget has never been easier. Check http://www.OwnYourCash.com. There you can also use our FREE budgeting software to get out of debt once and for all.
I am not a certified or licensed financial planner, a lawyer or anything like that. This information is my opinion and for entertainment purposes only. Every situation is different and you should seek a financial planner for your specific situation.
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