Years ago, before credit and debit cards became so prolific, consumers bought with cash. The majority of purchases were made with cash, with some of the more expensive purchases being made with check. While there are pro’s and con’s to using cash over credit cards and vice versa, there are three distinct benefits that going all cash provides.
Benefits of Using Cash
When you buy everything with a credit card, you can very easily get yourself into trouble by spending more than you have. Take it from me, as I have first hand experience with this. I am sure many reading this have also opened up a credit card statement and thought, “wow, I spent that much?!”
When you don’t see the cash leaving your pocket, it is easy to spend more than you have. We tend to forget about a purchase here and there when wanting something new. When the credit card statement comes, we quickly remember those purchases we selectively forgot about.
Easier To Budget
When you use all cash, it is much easier to set up and follow a budget. You can use the envelope system, where you place cash in various envelopes, each with its own purpose. When the envelope is empty, you can’t spend anymore in that budget category.
I will give credit to the credit card companies however as they have started to categorize your purchases for help with this issue. However, it is far from perfect. You may pick up a quick snack from the gas station while getting gas and have your credit card company lump that in with gas instead of dining out.
When you pay with cash, you will most likely end up with change. While some readers may dislike change, I actually enjoy it. I take my change and place it in a jar. At the end of the year, I head over to the bank, count it up, and get cash. I usually average around $500 each year. I then take that money and invest it.
You could do whatever you want with the money – invest it, build an emergency fund, make an extra debt payment, etc. The point is, when you pay with credit, you never have the chance to save this leftover money.
Going to an all cash spending plan has many benefits. I encourage many people to try it out, just so they can see how their spending habits change. Even if you are disciplined with credit, you can still learn a lot about yourself by going the all cash route. What’s stopping you from giving it a try?