Banks and retailers have benefited greatly the past few decades by promoting a cashless lifestyle. They convinced us that it's safer and more convenient to carry plastic. They declared cash old-fashioned and clunky, and plastic hip and cool. We gradually fell for the pitch and eventually got more than we bargained for — going cashless has turned us into a debt-ridden society. But things are changing on the consumer front, and cash is making a comeback.
Some of my readers like Martin B. are using cash to avoid dealing with credit card companies, collection agencies, etc. Susan J. and her husband wrote that they closed their credit card accounts because of past problems with overdraft charges and identity theft. Others like Bill and Jan W. are using money orders to pay bills. They cash their paychecks at their company credit union because it doesn't charge a high fee like check-cashing stores do.
These readers are switching to cash for specific reasons. But there's another reason individuals are shifting to a cash lifestyle, and it's perhaps more noble than any other: to reduce spending and increase savings.
Countless studies prove that you will spend more if you pay with plastic — anywhere between 30 and 200 percent more, depending on the study. It's a lot easier to make unplanned purchases when you pay with plastic, whereas cash is a fixed amount, so you simply cannot spend more than you have.
Making the shift from plastic to cash doesn't necessarily mean closing your credit accounts. It means only using cash for your day-to-day spending; it means planning ahead, shopping with a list, paying attention to prices and making purchase choices according to the amount of cash you have at the time — which can be tough. You need a variety of active credit accounts to maintain an excellent credit score, but you don't have to use them on a daily basis.
There are so many benefits to getting out of a plastic mindset. You will practice discipline, accountability and responsibility, and you will learn to accept delayed gratification.
Here's a simple way to get out of the plastic mindset: Get a stack of envelopes and label each of them with a spending categories, such as food, gas, dry cleaning, kids, etc. Cash your next paycheck, and deposit some of it into your account — just enough to cover bills you pay online or with checks. Then, divvy up the cash between the envelopes. Leave your credit card at home, and take your envelopes with you. Once an envelope is empty, that means no more spending in that category until the next fill-up.
At first, you'll feel as if you've jumped into the deep end of the pool without your water wings. Just take it one day at a time, and you'll eventually adjust and feel free.
Mary invites questions, comments and tips at [email protected], or c/o Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website and the author of "Debt-Proof Living," released in 2014. To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.
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