The Emotions of Cash

Go ahead, you can admit it, it’s ok.  When you see those coins at the top of this blog, you have an insatiable urge to grab them up, don’t you?  They are so enticing aren’t they?  Makes you feel kind of silly doesn’t it?  I mean, come on, really, they only add up to about seven bucks.  Oh my goodness, some of you are trying to verify that aren’t you?  Stop it!  And those are just coins, not even the green stuff.

In my last blog post, I discussed the importance of having a written budget.  Having a written budget is great, but just preparing a budget isn’t good enough, we have to actually stick to it!  Today, I’ll share one way that can help us not bust the budget.  It’s called paying for things with cash.  Whoa, crazy concept, I know.   Before I went through Financial Peace University, I paid for everything with “the card”.  Swipe, swipe, swipe.  It was upsetting if a business had a $10 minimum limit for credit card purchases or, heaven forbid, they didn’t take credit cards at all.

Remember when fast food places only took cash?  When McDonald’s started allowing credit card purchases, the average purchase went from $4.50 up to $7.00.  That’s nuts isn’t it?  How did that happen?  It’s called “feeling” the purchase when using cold hard cash.  In The Money Answer Book, Dave Ramsey says, “When you pay in cash, you can “feel” the money leaving you. This is not true with credit cards. Flipping a card up on a counter registers nothing emotionally. If you use plastic instead of cash you will spend 12 percent to 18 percent more. “  In other words, with cash we tend to order off the dollar menu, with plastic, supersize it please!

Advertisers recognize our emotional attachment to cash.  I’m sure you’ve seen the insurance commercial with the guy riding the motorcycle covered in bills.  Ok, that one creeps me out a little bit, to tell you the truth, so bad example.  But I like the tax advisor commercial where they put $500 in cash on every chair in a stadium and the one where pallets of cash fall out of the sky.  Very effective visuals.

Want to keep your budget on track?  Use cash.  Not on everything, it would be pretty cumbersome to pay the cable bill with cash, but on certain things it can be worthwhile – groceries, eating out, entertainment, clothes, just to name a few.  In Financial Peace University, Dave recommends the cash envelope system.  Have a separate envelope for each budget category in which you plan to use cash.  Fill up those envelopes with the amount you budgeted.  When the envelope is empty you’re done spending for the month in that category so you better manage your envelope wisely.

I’ll be honest, I was hesitant to try the envelope system at first, but I finally gave in and have been using it for a few months now.  It works.  It really does.  I’ll share more about my experience using cash envelopes, along with some tips and tricks I’ve learned from friends and through trial and error in next week’s post.

Do you think cash envelopes could help curb your spending?  In what area(s) do you think using cash instead of plastic could be the most beneficial to you?  Do you already use the cash envelope system?  Have you figured out exactly how much money is shown in the photo at the top of the blog?  Good grief, get a life 🙂