Paying cash for purchases is one of the best strategies you can employ to consistently reduce spending. Using cash naturally limits the amount you spend:
- Most people have much less cash available than credit at any one time.
- You know how long it took to accumulate that money. You will be conservative in spending it. When you purchase on credit, you are using money you haven’t earned yet. You are using other people’s money. It doesn’t carry the weight of meaning that cash does. Consequently, it is easier to spend more when credit is involved.
- Cash keeps you in the real world. When you pay with cash, you immediately realize the full effect of your spending. The money is gone at the moment of purchase. Believe me, it is much more difficult to write a check for thousands of dollars than it is to sign a contract that obligates you to monthly payments of a few hundred dollars over a period of five years.
- You will be reluctant to part with too much cash because there are other uses for it. You will not want to risk depleting your cash reserves and getting back into a cycle of debt.
- You save ten to fifteen percent in interest when you pay cash instead of financing a purchase.
- From my experience, items purchased with cash are maintained better and kept longer than items purchased with credit because of the additional weight of meaning attached to cash due to the time and effort necessary to accumulate it. Longer use translates into more value and a reduction in spending over time.
Using checks and debit cards to make purchases is spending cash. These payment vehicles are convenient. However, to realize the full benefit of purchasing with cash to reduce your expenditures, use the real thing: greenbacks, cold hard cash. Parting with paper bills is much more difficult than writing numbers on a check or swiping a debit card. The prospect of an empty wallet or purse acts as powerful restraint on the impulse to spend.
Copyright 2010 K.C. Knouse
K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages