You'll wonder why you ever fell into the credit trap

10 Reasons to Use a Cash-Only Spending Plan

by April Borbon

Are you in debt? Have you got into the vicious cycle of using credit to purchase things you need today only to find that after you pay your credit card bills you have no money to buy gas/food/necessities, which causes you to use credit again to see you through the rest of the month?

While using cash only (no credit or debit cards and using checks only for bills that need to be mailed) may seem drastic, here are ten good reasons to make this change:

  • You are forced to learn money management skills. Using credit doesn't teach you to manage your money, it teaches you how to juggle your bills. With cash only, you need to plan in advance for each day/week/month. If you buy a new coat and eat out four times this week, will you still be able to afford gas to get you to work next week?
  • You will learn the value of a dollar. With credit or debit cards, a quick swipe will get you a $4 latte and you won't even notice the money you have just parted with. With a hundred dollars on hand for this week and a need for gas, groceries and allowances, every dollar counts.
  • You will get creative. If your daughter's birthday is coming up and you have limited cash, there is no end to the creative steps you will take to give her a wonderful birthday. Excess "stuff" around the house? eBay it for extra cash. Have $100 for this week's groceries? Go meatless for a few meals, end up spending $80 instead of $100, and then put the $20 you just saved towards a special present. Left over wrapping paper? It can become confetti, streamers and decorations for the party. Creativity can be more valuable than money.
  • Related: The Top 10 Reasons People Overspend

  • The difference between "needs" and "wants" will become apparent pretty quickly. How many times have you "needed" to eat lunch out? Do you find that you "need" high end cosmetics whenever you pass the department store counter? Is every clothing purchase a "need"? With a limited amount of cash, your needs will line up quite nicely. You need gas. You need basic food stuffs. You may need eyeliner since yours is resembling a stubby pencil but do you need the $30 liner when you can buy basically the same product at Wal-Mart for $5?
  • You will stop the vicious cycle of credit card debt. First, you will have stopped using your credit cards and therefore stopped generating more credit card debt. Second, while having a limited amount of cash will lead to some (possibly) drastic spending cuts, at least each payment made to your creditors will pay down your debt instead of making room for more debt to pile up.
  • You will become a consummate shopper. Shopping with a limited amount of cash forces you to stretch every penny. You will learn to compare prices, cut coupons, maybe make a price book, look for alternatives, buy on sale, use rebates, search out discounts and basically get the most possible out of each dollar spent.
  • You will learn to determine what you need and not fall for the contrived "needs" generated by advertisers. Billions of dollars are spent each year to separate you from your hard-earned money. By making you feel deserving, inferior, or just not quite as good as you could be, advertisers convince you to spend your hard-earned money on quite a bit of expensive, frivolous stuff.
  • Related: The Subtle Psychology of Credit Cards

  • You will be giving your friends, family and especially your children a reality check. Living an extravagant life based on credit card spending is not reality. Instead, it's a fairy tale. Unfortunately, there is no White Knight to save you from impending financial disaster. Living a cash-only lifestyle is reality.
  • You will actually save money. Aside from a few perks that come with using a credit card, unless you pay your balance in full each month, you are losing money to interest charges and worse, over limit or late fees.
  • Related: What Does My Debt Cost Me?

  • You will be in charge. Using credit puts you at the mercy of creditors and lenders. They set the interest rate, they set the payment rate, and they send reports to the credit bureaus. Paying with cash allows you to be in charge of your finances.

There is no doubt that switching to a "cash only" spending plan is hard; the first few months will probably be the worst. However, with a positive attitude and a large dose of creativity, you will wonder why you ever fell into the credit trap.

Reviewed March 2018

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