Here’s why. When you pay with a credit card, it’s difficult to track where every dollar goes. In fact, it may even feel harmless – $5 here, $25 there, and so on. These credit card purchases quickly add up, making it challenging to dig out of expensive, high-interest bills and monthly payments when you’re living paycheck to paycheck. Cash, on the other hand, gives you visibility into every dollar you have (literally). It’s a physical form of payment, and you’re limited to just what you have in your wallet.
You may be wondering how to get started with cash and how it can help.
Precise control: the envelope method.
Use envelopes to categorize spending. You may have an envelope for groceries, gasoline, emergencies or restaurant dining. Next, plan your spending until you hit your next paycheck, and stuff the envelopes with the appropriate amount of cash.
Two things are happening here. First, you’re forced to plan and give serious thought to how much you really need to get by until that next paycheck. It forces you to prioritize. Then, there’s the visibility aspect. Once you spend all the cash in your grocery envelope, for example, that’s it. If you’re truly committed, you must raid what’s already in your refrigerator until that next paycheck arrives!
Reduce stress – stop worrying so much about money.
Fifty percent of Americans have some stress related to their finances. Learning money management skills and understanding where every dollar goes is known to decrease money-related stress. Spending with cash also forces the money conversation in households where it’s just not happening now; cash forces people to discuss priorities and means.
Greater control over spending equals less stress. It’s that simple.
Cash always comes through in an emergency.
The recent slew of hurricanes is a perfect example of the value of cash when life takes a wrong turn. For example, in the event of a natural disaster, you may not be able to get to work or the store, and even if you can, you may not be able to pay with credit cards if downed power lines and collapsed infrastructure play a part of the storm’s aftermath.
Cash comes to the rescue in times of disaster. Building an emergency fund and keeping the cash in several accessible locations in your home gives you peace of mind that you’ll have the means to survive days, weeks or months should you need it.
It’s easy to see why cash remains a popular way to manage spending and budgeting. So what are you waiting for? Get started today to stop living paycheck to paycheck!