CASH IS KING!

If you've been reading my blog, you probably saw the post where I talked about using cash for all your spending as opposed to debit and credit cards. I can't emphasize enough how important this action is to your debt free journey's progress. I know that it has truly made all the difference in the world to me as it puts a physical limit on spending. Basically, if you don't have the cash in your pocket, you can't buy anything. Wow, what a concept. You mean, if I don't have enough money for something, I shouldn't buy it?

Now, there's many excuses for not using cash. I've used them all and was very reluctant to go with this approach. Some excuses I personally used were: Inconvenience, Embarrassment and Security

Inconvenience - A prime example is filling up the gas tank; going in to pay the cashier cash is much more inconvenient than just swiping your card at the pump. Another excuse I used pertained to buying things on-line. I tried to convince myself that I was missing out on massive discounts because I couldn't purchase things from web sites with cash.

Embarrassment - This might sound really messed up but I used to think that people who had platinum or gold credit/debit cards were really rich. So, in turn, I thought that people who paid with cash/change were just getting by because they had to buy things with the cash/change they scrounged up. Talk about backward thinking huh? Another excuse related to embarrassment that I used to think of was the fear of getting to checkout and not having enough cash in my pocket. I never wanted to be "that guy" who had to return things he couldn't afford. I preferred to plop my card down so that no one thought of me as the poor guy who held up the line.

Security - Another argument I used to not strictly use cash was that carrying a bunch of cash is dangerous. I convinced myself that I would more likely get robbed if I had a bunch of cash on me. It was so much safer to use cards because thieves would have a harder time using my stolen cards than spending any stolen cash.

Needless to say, I have finally squashed all of those excuses and now I use cash for my daily spending, always. Do I feel inconvenienced at times because I'm always using cash? You betcha! But that's the beauty. It's good to be inconvenienced when it comes to spending money. That alone, should help you control impulse spending. Guess what, if you're at the grocery checkout line and you see a couple of candy bars you were craving or you see some interesting magazine covers or you see a funny DVD that might be a good addition to your collection, you can't buy it if you don't have enough cash in your pocket. Or if you need to get gas and you only have $10 in your pocket...well, you just put $10 in as opposed to filling it up. There's no rule that says you have to completely fill the tank every time you visit a gas station. You laugh, but it took me awhile to get that through my head. I used to think that it would cost me more to put in gas a little at a time because I would have to make more trips to the gas station. But even if that's true, it's the principal of only spending what you have that is far more important than the few cents you save from not making multiple trips to the pump. And how about the embarrassment factor? Well, I make it a point to calculate the items I have in my shopping cart so that I feel pretty confident that I have enough cash to pay for it all. And in the rare event when I mis-calculate and I don't have enough money? Well, I simply tell the cashier to remove some items to get me under my budget and I say it proudly. You see, I have it ingrained in my mind now that going over budget is much more devastating than having people you probably don't even know wait a couple of more minutes to checkout. Heck, they should be doing the same thing too if they want to ensure they stay on budget. To address the last excuse, I can say that I've been robbed via identity theft (fraudulently used my debit cards) more than I have been robbed of my cash. So, that kills that excuse right there.

OK, now that you know CASH IS KING, how can you logistically get started using it full-time:

1. Cut up all of your debit/credit cards so it's impossible to use them.


2. Create buckets or categories of your spending needs (i.e. groceries, household items, dining out, entertainment, gas, etc...)


3. Create weekly budgets for these spending needs. I strongly urge a time frame that's more frequent than monthly, even though everyone and their brother uses monthly budgets. I started out using monthly budgets but quickly found that I would tend to borrow from myself in the early weeks of the month. So, by the time the end of the month comes around, I didn't have any money left in my budget. And since I couldn't just starve my family, I would just take money away from the amount I was going to pay down debt with or save, to compensate for the over-budget spending. Weekly budgets have really worked out for my family but you should make a budget for whatever makes sense for you. I know some people who should probably have daily budgets to keep themselves honest.


4. Put the appropriate amount of money in cash into envelopes for each budget category.


5. Before you leave the house for any reason, think through where you will be going and what you plan on doing. Only take out money from the envelopes that are applicable to what you PLAN on doing while you are out.


6. If you run out of money in the envelope, you are done spending for that category till the next budget cycle (daily/weekly/monthly)


7. Replenish the envelopes with the budgeted amount once you enter the next budget cycle. If you so happen to have money left over from the previous day/week/month, then you get a little extra to spend on that category during the new cycle.

****Note - I will probably write up an entire post on budgeting, so I'm not going to go into too much detail now. But one thing I will say is this; think of budgeting like dieting. I strongly suggest that you ease into it. In other words, for your first few budgets, don't go crazy on trying to budget too little. I would initially budget for the same overall amount you captured when you tracked every expense you made. That way, you can at least practice staying on a budget you are pretty comfortable with. This will build up your confidence for sticking to a budget. Then, once you successfully stay on budget a few consecutive times, you can tighten the budget. It's similar to not overdoing it in the gym on your first visit. If you do, you'll never want to go back.

Well, I hope you see how using cash on a day-to-day basis can be very beneficial for your debt free journey. Once you do it and get used to it, you'll want to keep going. Soon, we'll be debt free and buying cars, houses, businesses....with cash! It's amazing how powerful cash can be. The title of this post says it all, CASH IS KING!