Cash Only, Week 1: I Actually Spent More!
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photo: Refracted Moments™
On April 1, BargainBabe.com blogger Julia Scott gave up her credit cards for one month. The goal of her experiment: find out whether using cash only will get her to spend less. Here’s what happened during her first week.
I’m one week into my cash-only month and so far I’m spending like crazy. Let’s see. $490 in one week? Not good. (I usually spend $300. What happened to those studies showing that people spend less when they shun credit cards?)
The problem is, I have not been able to shake the emotional security of credit cards – you always have enough money with credit – and that has lead me to carry around a ton of cash. Which. I. Spend. Immediately. I’m paranoid about running out of cash, which, ironically, is leading me to spend more and…run out of cash. Doh!
Here’s what I’ve learned so far.
* I’m much more generous with a wad of bills in my pocket. I’ve bought friends beer, paid cover charges for others, indulged in fancy coffee drinks and bought myself homemade beef jerky. Cash turns me into a big spender.
* I have no idea where half my money is going. I’m not in the habit of asking for receipts – my credit card tracks every purchase for me – and cashiers rarely offer a receipt on little purchases.
* In certain situations, cash is not good enough. Like at the ski lodge when the cashier wants to place a $300 credit card hold against my snowboard rental. Luckily, a friend was with me and did not mind using hers.
* Getting past my paranoia of running out of cash is probably my biggest impediment to spending less. I need to carry less cash, so I spend less.
I’m on track to spend more during this month-long credit-less experiment than I usually do with plastic. But I wonder if I will become more wary of spending as my stack of bills runs low. Stay tuned for next week’s installment of my credit-and-debit-card moratorium.
Julia Scott blogs about saving money on everyday expenses like groceries, gasoline, and gifts at BargainBabe.com.
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24 Comments so far
leave a commentHow about this? Try a BUDGET. Only take out the cash that you NEED. No offense, but you sound like a 12-year old let loose in a Toys R Us!
Maybe I’m missing something, but I don’t see how being afraid of running out of cash makes you spend more. Shouldn’t make you apprehensive about spending on unnecessary purchases instead of randomly buying stuff that you wouldn’t have if you only had a credit card?
This article is retarded. It makes no sense and is a blatant lobbying effort for using credit cards. No thanks Mint – you guys have fallen off the wagon a lot lately. Way to undermine your credibility even further.
Are you on vacation? Beer, coffee, cover charges, ski lodge? I hope this isn’t a normal week.
Yep… Thats the key.. set a budget. Only take out what you need from the ATM at the beginning of the week and even if you run out of money, don’t take out any more till the next week. That way, when you overspend on week 2 and go hungry for a couple of days, you’ll be more frugal by week 3. Good luck!
You say you are worried about running out of cash. That’s exactly what a budget is for! Only withdraw the cash you need for daily purchases like groceries and entertainment and leave money in your checking account for bills.
Carrying around a wad of cash isn’t helping you unless you have strict rules for its usage.
I spent less as soon as I switched. Like others have said, I’m on a budget, and it makes a huge difference. I downloaded an app for my phone that lets me track all my spending on the fly. It’s great!
Also, why are you worried about running out of cash, there are ATMs all over?
My budget is $510 for the whole month. Wow!
I have to agree with the other comments. When I pull out $300 in cash, I limit myself hard to that amount. I set aside a certain amount for groceries mentally and don’t allow myself to dip below that. when I hit a restaurant yesterday with a friend I drank water instead of ordering a drink because I knew I was running low on funds.
The key to cash-only purchasing, or budgeting in general is to set a limit and be adult enough to stick to it. Tell your friend sorry, but you can’t buy their latte or cover charge, as you only have so much money.
Yeah that is what happens to me too. I think Dave Ramsey got it wrong way wrong. Can’t stand that guy. way to many holes in his thinking
| way to [sic] many holes in his thinking
such as … ?
I would love to hear your theories on all of his holes. I can assure you it is working just fine for me, my family and hundreds of others that I know personally.
Oh Lord. To do this experiment you should come here in Italy. I think the Country with less trust in using a credit card in the world.
I agree. Are you on vacation? Budget is key. If you cant control your cash spending, take your cash and put it categorized envelopes if you want to only spend a certain amount on items. I’ve lived without a credit card for two years no problem. If you wanna track your purchases digitally why not use a debit card? This article seems like it was written by a bad marketing team hired by a credit card company. You don’t need them.
I think the problem here is your self control. Obviously you don’t care where you money is going if you are spending it like this. The following line
“The problem is, I have not been able to shake the emotional security of credit cards – you always have enough money with credit”
is a testament to your lack of self control. Credit means you don’t have the money in the first place. Does not matter if you are going to get it next week during your paycheck and pay off the balance, you are still buying it without the money in your pocket. Which in your case, will be gone very soon. The financial acuity of the mint blogs have been going downhill lately and this is a utter low. Grow up and get a little self control. I did however like the recent article about price anchoring
http://www.mint.com/blog/how-to/price-anchoring/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+MyMint+(Mint+Personal+Finance+Blog)
She freely admits that more cash in her pocket makes her want to spend more, and then admits she doesn’t bother keeping up with what she’s spending?
Not too bright there…babe.
I, too, find I spend more with cash than credit, despite whatever study Dave Ramsey throws around that indicates the opposite. Oh, and before someone posts that I just need to be self-disciplined, budget, etc, well, you could say the same thing about credit card use. I find that I’m able to be more disciplined with credit card use than with cash in hand. (I also spend less than I earn in general, pay off credit cards monthly, and have a pretty substantial net worth).
Jennifer raises a good point. The comments about discipline could just as easily be applied to credit card use. I use my credit cards like a debit card; I don’t spend more than I have, never carry a balance, and I collect rewards on it. If someone steals your debit card, your bank account gets emptied and you spend a month or two trying to get it refunded. If your card gets stolen, you still have the money in your bank account to rely on while your cards get reissued. In an absolute emergency, I can charge something and carry a balance, which isn’t an option with cash. Its just extra protection.
I do the same thing! Honestly, the people who spend more using credit (and are therefore saying that “cash is the only way to budget”) seem to forget that not everyone has a complete lack of willpower and the inability to budget using abstract concepts.
I definitely spend more when I have cash (like the blogger) than when I just use credit/debit cards…which is why I barely carry cash.
For those asking if shes on a vacation, it seems as though the ski lodge would indicate that…but nothing else really does. People usually buy a fancy coffee drink (hello…starbucks?) at least once a week along with beer or whatever at least once a week (which could be where the cover charge comes in also)…why she was paying for her friends’ cover charges though I’m not sure.
Um, not to criticize, but if you usually only spend $300/wk, then maybe that is ALL the money you should carry – better yet, $30 less. Just spending cash doesn’t change our spending habits unless it shows us how irresponsible we are with it. We plan our vacations, we plan work projects, we plan meals, maybe we should also have a plan for our money. At this point, that ugly word comes up – Budget!
Maybe you are also not paying as much attention because you have a time limit in mind. I am only doing it for this long, so no need to pay attention. Committing to it for an extended period of time might help you be more conscious of the money running through your fingers. Good luck with your experiment!
The personal attacks are a little much, guys. She’s trying a new budgeting mechanism and it’s not working out perfectly, and I don’t see anything wrong with that. If you’re too afraid to make mistakes you won’t try anything new, and you won’t experiment enough to find the budgeting tools that work for you. I think that people new to personal finance can learn a lot from seeing the trial-and-error process, and that’s why this is a useful series of posts.
I think it’s pretty clear that different people have different money troubles. If your problem is spending more than you realize on big impulse purchases, it seems like you’ll be better served by paying cash. Other people, with other money behavior and money psychology, will do better with other tools.
And even very smart people can make money mistakes. Don’t claim you’ve never done it. Yes, it’s much easier to identify someone else’s money mistakes than it is to identify yours. But still: there’s no need to insult people about it. The point is finding a successful budget mechanism – if it doesn’t work for you, it doesn’t mean you’re an idiot. It means that budget system doesn’t work for you.
I also have a tendency to spend money more freely when I have cash than when I have credit. I do a bad job of tracking my spending when it is in cash. I focus more on the balance of my checking account. So by the time cash is in my pocket, it almost feels like it’s already gone. On the other hand, when I buy things using my credit card I see the transaction post to the account and I am more aware of it. When I buy an extra beer with my credit card, my guilt will last all month until my credit card website shifts to the next statement. When I buy an extra beer with cash, my guilt last only as long as I hold onto the receipt. I don’t like feeling guilty, so I end up throwing away the receipt pretty quickly, often before I record the transaction somewhere (sorry – I’m just being honest). I know what you’re all going to say – you should budget! Have some self-control! Only take out as much cash as you need! And maybe if I changed over to a fully cash system, my spending habits would change. But with my mind constantly focused on my credit card balance, cash falls through the cracks. I have found the best way for me to have self-control is to put everything on my credit card and check my balance every other day like a paranoid freak. If my system requires an additional step of recording each transaction, the system will fail.
If the sensation of having “the wad” and know it’s available is the problem then why not try this experiment with a debit card tied to an account with limited funds instead?
That way you don’t have the cash on hand, still get all the tracking benefits and can “refill” the account when the budget dictates. All the while forcing yourself to live within a hard budget.
I haven’t purchased “on credit” for years (can’t even remember exactly how many) but use a debit card almost daily. I also keep a small but reasonable amount of cash on hand for those purchases where a card would be awkward.
Yeah give the girl a break…She’s trying and coming to terms with her -self-
Remember, practice practice practice!!!
Wow.. I feel the same like you.. when I buy things using my credit card I see the transaction post to the account and I am more aware of it. Thank you for bringing a well thought out and reasoned comment to the discussion.
I’m always up for a thoughtful discussion of semantics.
the cash code