Friday, March 5, 2010

Cash System

We are slowly moving towards a cash system.  We still need to work out some of the kinks, but as I read about other people getting rid of their credit cards and going to a strict cash system, I see the benefits of it.

Cash has some sort of psychological thing over people that keeps them from spending as much.  Credit cards on the other hand also makes it much easier to spend. This barrier or tolerance threshold seems to be lowered considerably when using a credit card.  Why is that?

I'm not sure, but it probably has to do with convenience and laziness.  When I run out of cash, all I need to do is swipe a card and don't worry about it.  Without the card, I would have to go to the bank, withdraw a certain amount of money and then spend again.  This extra "inconenience" is enough to hinder spending.

How is it working for us?  We haven't gone cold turkey yet.  But we are trying this system.  We've allocated $150/week for food and other expenses.  I'll still pay gas with our credit card, but I see more and more gas stations give $0.05 discounts if you pay with cash.  Gas is about $2.70/gallon, so that's an instant 2% cash back right there. 

What about all those other cashback programs that credit cards have? Well, all I have to say is the less we spend, the more cash we'll have back.

What can a budget do for you?

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