In the modern world where life moves fast. It seems like cash is part of the past. The “what’s in your wallet?” slogan and other credit card commercials only reinforce the opinion that credit cards are a necessity. However, we suggest you pay cash and leave the credit cards at home. Here we explain the power of paying cash and how it helps you manage your money better.
Helps you Stick to Your Budget
A great way to ensure that you stick to your monthly budget is to pay with cash. When using cash, it is easy to recognize when you have spent all your money because your wallet is empty. Let’s say that you give yourself $400 a month for groceries. By the last week you are left with $50. Now you have a choice. Use a credit card and bust your budget or dig through the pantry. Planning your weekly menu around what you have at home plus whatever you can buy with your remaining $50. It is very easy to see which option keeps you moving toward your goals and which option moves you further away
A commonly overlooked perk of paying cash is saving on fees and getting discounts. More businesses are pushing the expense of credit card processing on to their customers. But when you pay with cash, there are no extra fees and may even be a discount! Gas stations are a perfect example of getting a discount for paying with cash. As you have more cash on hand, you may even be able to negotiate a better deal on big purchases by informing the sales person you will be paying cash, not credit.
Don’t just take our word for it…research has proven that using cash helps people spend less. A study at MIT showed that people are willing to spend more when paying with a credit card versus handing over cold hard cash. In the study participants were told they could win a pair of Boston Celtic tickets in an auction. The participants were then split into two groups, one group had to pay for the tickets with cash, and the other with a credit card. The result? Participants paying with credit cards were willing to pay up to 64% more than those paying cash! This study shows how our brains perceive the value of cash and we are more frugal than when paying with plastic.
There you have it! By making one simple change and leaving the credit cards at home (or dare we say – cutting them up!!) you will find that you spend less and save more. So the next time someone asks what’s in your wallet just tell them, “Cash!”