Cash Only: Can it save your family money?
For the first time in our 15-year marriage we are trying to use only CASH to pay for things.
I know this is not a new concept, and I know it is touted by money gurus as a good way to save money, which is why we’re finally giving it a try.
We’ve always used credit cards and have always paid them off every single month. (I can think of two times in our entire marriage that we ever let a payment roll to the next month on a credit card.) Debt is not our problem.
Our problem is that we spend more than we should each month because it is so easy to whip out a charge card and pull the extra money from savings later to pay the bill.
The problem with this is not that we can’t cover the bill (at least at this point) but that we could be saving more than we are. Plus, we are often wasting money on stuff we simply don’t need!
(I need to clarify that I am still paying our regular monthly bills (like mortgage payment, car note) online deducting from our bank account, but we’re trying to use only cash, no credit cards, for things like groceries, vet bills, gas, birthday presents, etc….)
This will be my third week as a cash-only customer and Michael’s second week. (I started while he was on a business trip so he was on his company’s dime that week.)
Already we are seeing the effects of only paying with cash.
So many times last week I put things back on the shelf at stores because I knew it was coming out of the very limited funds in my purse. For example, I went looking for a birthday present for one of Rose’s friends and saw some cute dresses for my 2-year-old at the Gap. If I hadn’t been paying with cash I can guarantee you I would have bought at least one of those dresses. Plus there were some super cute pajamas the baby would have been adorable in. I put back an organizer for myself and a book for my brother because I knew I didn’t have that much cash in my purse.
Michael came home last week and said he was sorry for doubting this experiment would do much good. He said it limited him the whole week. No pizza for lunch when he knew he had a sandwich in his office. No nut mix or Fiddle Faddle at the drug store when he stopped for deodorant.
What we’re trying to decide now is: If you have leftover cash at the end of the week do you just take less money from the bank for the next week or do you put that money in a big jar for special things like vacations?
Could you go credit card cold-turkey? Could you go cash only? If you are a cash-only gal, how do you handle the logistics of it? Do you get a monthly amount, a weekly amount? What do you do with any money left over? How much do you give yourself for the month? How much does hubby get? (Poor Michael got a lot less than me because I’m buying for all five of us and he’s just taking care of himself for the most part.)
What do you do with odd bills — like I need to buy a new mattress for the toddler bed for the baby – does that come out of my weekly amount?
Tell us about cash-only experiences? Would you be willing to take my cash-only challenge?
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68 comments Add your comment
Theresa Walsh Giarrusso
August 24th, 2009
3:41 pm
Spent too much at the grocery store. bought 2 jars of peanut butter at almost $5 each because we like the low-fat kind. Had one already in the garage — thinking about taking back two jars of pb — also thinking we should switch to full fat because is cheaper — hmmmm — so many variables to consider.
lynn
August 24th, 2009
3:53 pm
Theresa, look at the latest Time magazine report about organic foods and the expense. It changed my thoughts about going organic after reading it today. Very interesting article.
BShepCarlin
August 24th, 2009
4:01 pm
We use a credit card for everything and like Theresa pay it off every month. We go the credit card route as you get rewards from the card. We are big Discover people because we get cash back. Like Theresa (we have a lot in common!) we do occasionally have to dip into savings for unexpected purchases ie…brakes for the car that kind of thing. What I do that keeps us within budget is I keep a running tab in a notebook of all my purchases and the category…grocery, gas, retail, etc. When I hit my budget number, I stop shopping! It takes some getting used to, but if you write your purchases down as soon as possible it gives your a good idea of what you are doing with your money. It requires a lot of discipline but works for us. I don’t like having cash on me because I am more likely to spend it than a card. Odd I know, I think most people are the opposite.
Tig
August 24th, 2009
4:11 pm
I like the idea of utilizing a cash budget but unfortunately I bank with a credit union that only has a ’shared service center’ near me and not a regular branch, and for me it’s not worth it to get cash at $1.50 a transaction at the atm :(
(and of course their hours are smack dab in the middle of my work day so going to cash a check there during a lunch hour would be crazy with street traffic and people)
Tig
August 24th, 2009
4:12 pm
Whoops, forgot to add that I don’t use credit cards normally, just my checkcard that debits my checking account directly.
Kathy
August 24th, 2009
4:30 pm
We have one CC ( a Disney VISA). Other than the bills that hubby pays on line, everything gets charged to the Disney VISA. We stick to a budget (no charging over a certain amount each month), keep meticulous track of it and pay it off at the end of each month. If there are emergencies or things that we need to do that are outside of the budget (this month it was buy a new computer), we charge it as well and then use savings to pay for the “over budget” items. This works well for us because we are very disciplined about our spending and have zero debt. My husband is very good at saving any extra money we have so that we can afford the “over budget” items and not go into debt to buy them (like my fabulous new iMac…..I am so in love with it!). We will have lots of Disney Dollars to use when we go to Disney World early next year. It really isn’t a great rewards program though…..$1 for every hundred you spend. It has taken us a long time to build up a decent reward. We are going to switch to a credit card that has a better rewards program after Disney.
@Connie Jenkins…..you don’t have to worry about interest rates on a credit card if you pay it off every month.
penguinmom
August 24th, 2009
4:31 pm
nurse & mother, the credit counseling place gets a small fee from us every month. I think it’s around $50. There are rip-offs which ‘consolidate’ your loans into a loan with them. I think that’s a bad idea. Ours negotiated with each card separately.
We tried negotiating ourselves but it didn’t work. They’d offer a short term plan that helped for 6 months but then we were right back to high interest rates and not being able to pay the minimum. Often they wouldn’t work with us unless we hadn’t paid anything in months (not good for the ole credit report).
CCCS has been a huge blessing. It’s not perfect but one bill each month as opposed to 5 is wonderful. The amount we are paying now towards credit cards is significantly less than we were paying on our own (even with the small fee to CCCS). And our balances are going Down, Down, Down.
It may not be for everyone but it is a lot less stress for us.
HB
August 24th, 2009
4:34 pm
Is this article you were referring to Lynn? http://www.time.com/time/health/article/0,8599,1917458-1,00.html
Very interesting read — thanks for sharing!
lynn
August 24th, 2009
4:43 pm
HB – yes that’s it! Thanks for posting the link. I thought it was food for though too and you’re welcome.
lynn
August 24th, 2009
4:43 pm
Ooops…that was food for thought….
deidre_NC
August 24th, 2009
6:01 pm
just a fyi…i bank with a credit union and have a line of credit which really is just overdraft protection. my bank wont let me overdraw…if i have used up all of my line of credit it will deny my purchase if there isnt enough in my account. im not sure all bank s do this-but i know a check will go thru and my debit card wont…so i never have overdrafts with my debit card…plus as i said i always write my purchase in the register…at least the amount then fill in the rest later…i write 2 checks a month…all else is paid with my bank bill payer or online…the checks are for these 2 stupid credit cards that actually charge me to pay my bill online…that is the stupidest thing in the world…they beg me in each bill to go paperless yet charge me if i do…grrr….those WILL be paid off soon and cancelled…and yes i know that cancelling a card will hurt my credit…but i am not that self controlled so i will cancel when they get paid…
motherjanegoose
August 24th, 2009
7:37 pm
Good tips today.
Clark Howard once mentioned a way that you could see which credit card pays you back and what rewards program would be the best….I cannot remember it.
I use a Hilton Honors American Express Platinum and have over 700,000 points now, which translates into the possibility of taking at least 4 folks on a cruise for FREE ….IF we do not go in the high season. We used 120,000 points in April to stay at the Embassy Suites in NYC for free…3 nights.
I have had this card for years and pay the balance in full every month. A friend’s son ( who is an accountant) e-mailed me once to introduce the card ( they run referrals sometimes).
I replied that I already have the card and he told me it was the best card for reward points….if you
want to redeem them for travel. He and his wife stayed 5 nights at an upscale Hilton resort in Maui for FREE on their points. I used Discover previously and the perks I got from it were terrible but if you do not travel, then maybe their rewards are better. Whenever Discover calls and reminds me that I am not using their card, I tell them why and the salesperson usually asks me to give him/her the name of the card I use.
If you do pay your card off in full, I think the rewards points are a benefit….anyone else?
Isn’t this a way to “save” for a vacation or maybe earn gift cards to share during the holidays.
I have to have credit cards to travel….can you even rent a hotel room or rental car with cash….I do not know. I do not worry about the interest rates, as I do not carry a balance.
motherjanegoose
August 24th, 2009
7:38 pm
As I mentioned earlier…the AE is used for my business expenses.
Sunshine
August 24th, 2009
9:43 pm
Dave Ramsey’s book is great. He teaches you how to save $1000 for emergencies (I keep reading about how ya’ll have them!) and how to use the snowball effect to pay off your debt. He was a millionaire twice so I’d check his book out or his website. :-)
Henry
August 24th, 2009
10:51 pm
I live on the cash basis, and do it for the whole month. I have a savings account at a credit union; I withdraw exactly what I need to pay my bills and my purchases for the month. I leave the rest in the account for later in the month.
I take my cash to purchase money orders for my bills and mail them. I shop in the bulk and it lasts for more than a month. I have been doing this for almost two years. I have paid off several of my credit cards, and very close to finishing that by the end of this year. I have a house note, and car note. I have two small children and I have to budget everything. If an emergency arises, then it comes out of savings.
I used to bank at Wachovia but I took my business elsewhere because they would wait 2 days to deposit my checks, even my direct deposits. The fees would wipe out my account, especially after going to the grocery store. After a year of dealing and pleading with them to actually put my money in the account and then pay the bills…instead of racking up the fees. I have been with the credit union for over 2 years and haven’t experienced any fees yet.
I put money on a gift card while I am in walmart or sams, and then I can stick the card in at the gas pump w/o having to leave the pump. This works well when the kids are with me. I have been doing this because of a job loss 18 months ago.
Mom
August 26th, 2009
2:49 pm
I put absolutely everything I can on a cash back credit card and pay it in full every month. I have zero debt, a healthy savings account, paid for the each of the 3 cars (2 brand new) I’ve had in my lifetime in full at the time of purchase and paid off the mortgage on my house in about 10 years. I did all of this as an only parent with an extremely modest income (around $20K since I’ve chosen to work from home for the past 5 years). We live a frugal but very full life and want for nothing.
I rarely use cash. I’m digging deep at the moment and cannot come up with the last time I used cash. The last time I wrote a check was in Sam’s over 7 months ago. Though, I do know that I’ll be writing some checks to the school now that the year has started. I do not have a debit card.
Credit cards are infinitely better than debit cards. With a credit card, any mistakes are resolved before a penny comes out of my pocket. With a debit card, money is taken directly out of your account (potentially racking up overdraft fees from the bank and returned check fees from the vendor and preventing you from accessing your own money – what happens if it’s a weekend or holiday or after hours or you’re on vacation!!) until mistakes are resolved…maybe, eventually…on your dime (many dollars, actually) and your time.
The only reason I can see for anyone to resort to paying cash is if they have self-control issues. If you have to have the physical reminder of the actual cash in your purse to determine whether or not you’re going to purchase something, you’ve got way bigger problems than deciding whether to use cash or credit.
Clearly, Theresa, you’ve admitted to having self-control issues. You openly admit that you buy things on impulse. You and your husband both apparently spend money mindlessly. While forcing yourself to use cash highlights the wasteful spending habits you have, it cannot magically make you gain real self-control.
Why would you use cash at the gas pump? Are you going to overfill your gas tank if you use a credit card instead of cash? Are you going to mindlessly drive around and needlessly burn more gas if you know you paid for it with a credit card instead of cash?
Why would you use cash at a grocery store? Are you going to pick up junk food or other overpriced extra stuff you don’t need/won’t eat because you’re going to use a credit card instead of cash?
There are many protections that are in place when you purchse with a credit card. You lose those protections when you use cash, checks or even debit cards (contrary to popular belief, the protections on a debit card are NOT as extensive as they are on a credit card).
And, for those of you who stuff envelopes full of cash at home – what happens if your house is destroyed or burglarized? It sure sounds like you’re out at least a month’s worth of money. Don’t think it can’t happen to you. I have two friends who have recently lost their homes due to fire and several who lost theirs in a tornado or other natural disaster. I have had my house burglarized twice. Trust me, they KNOW all the hiding places – your cash would be gone. Then what would you do? Insurance companies only replace cash up to a certain amount (typically around $200) and that’s typically less than the deductible amount.
Stay clear of those debit cards, Theresa. A simple human keying error quickly turns 100.00 into 10000. Won’t that be fun to clean up after the fact? I have friend who went through that nightmare. Months later, hours and hours of his time invested and he’s still not been refunded all the fees…
Money and Relationships
August 29th, 2009
5:41 am
At times couples are squabbing over money matters and their relationships affects
a lot because of this. i too was one of the victim to this and i was adviced by one of my friend to get rid of this and i did …
i thought the same way as you did a few months back when i and my partner had some issues on money matters and our relationship seemed like it is gonna sink
and i went into depression and only on one day my friend made me realize how i could overcome my issue with this.
And it worked for me and now, we are a happily living couple.
Money and Relationships
Danny
September 1st, 2009
11:22 pm
We also don’t have a problems with deb, just a problem with spending. We sometimes spend over $400 per month eating out. I know for us that’s entirely too much and I think an all cash system for the budget category would be great for us. We could easily cut that in half and increase our savings $200 per month. It’s something I would like to try in the coming months.
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