5 Things That Happen When You Spend Only Cash

In Friday’s roundup post, I mentioned that my wife and I were restarting our methodology of spending cash only for our day to day expenditures.   Here’s a brief look at how it works:

• Monthly bills are paid online out of our checking account
• Each Friday, cash for our personal spending is withdrawn from the ATM.
• Personal spending includes gas, groceries, allowance for the kids, and entertainment funds

With this system we had been extremely successful managing our finances and staying within our budget.  As happens in life, we got lazy and began to let our structure slide in favor of the convenience of just swiping our debit card.  The result was that we found ourselves overspending, which impacted our ability to reach our future financial goals.  We wanted to regain that firm grip on our finances, so we decided to back to the system that worked well for us.

As per our discussion, on my way home from work on Friday I stopped at the ATM and withdrew the agreed upon amount of cash.  As we went through the weekend, we noticed a marked difference in perspective and thought process when it came to spending.

You Constantly Evaluate Your Resources

With almost every purchase, one of would question how much of our entertainment funds remained.  We knew how much we had left at all times.  This is in stark contrast to when we use our debit card for purchases.  Using cash adds physicality to spending money.  When using a card, one would have to add up purchases to determine the total spent, and how much is left of the budgeted amount.  By using cash, it’s as easy as opening the wallet and counting.

You Pay Attention To Your Budget

Normally I’d pull up to the pump and fill the van with gas, paying at the pump with my debit card.  This time, I pushed the “pay inside” button and started filling the tank.  I knew what my budgeted amount was for gasoline, and I watched to ensure that I didn’t exceed it.  In this instance,  it cost a few dollars less than what we had allocated.  But, if I had reached the budgeted amount, I would have stopped the pump.  This would have prompted a discussion as to whether we were allocating the right amount.

You Discuss Budget Overruns

Our grocery bill went over budget.  However, we decided together to take funds from our entertainment bucket to pay for the overage to buy some extra items for a nice steak and shrimp dinner.   The logic was we were making a nice dinner instead of going out to eat, therefore it was appropriate to take funds from entertainment to pay for extra food.

You Think About Value

Before spending any money, there is a discussion of whether the potential expenditure was worth it.  When you’re dealing with cash, the amount of money is blatantly finite.  When a card is being swiped, one could think of their funds as infinite because you can’t see it.

You Think Ahead

With the amount of funds available being obviously finite, we found ourselves thinking ahead.  We might need some cash for household needs during the week, so we better make sure we don’t spend everything.  My wife expressed some interest in having her nails done, so we needed to find out how much that would be and set aside some cash for that.  When you force yourself to think ahead, about potential expenditures, it becomes harder to spend money now.

Switching back to cash only spending had an immediate and profound impact on how we managed our money.   One other thing to mention is that it naturally increased our communication regarding our finances and how we wanted to use the resources available.  This is a good change.  This has been a necessary change. Now, we just need to keep it up.

How about you, EOD nation, have you thought about spending cash only for your day to day expenditures?