As important as a budget is to financial independence, prioritizing your expenses and working through financial difficulties can be aggravating at best. Budgeting and managing your money is important for you and your family’s security, but it can be easy to forget about long term goals on a day to day basis. Paying with cash is a great way to keep your expenses in context and visualize your spending, all of which will help you with managing your money in the long run.
Avoid Credit Card Debt
This one might seem obvious, but using cash can keep you out of debt. One of the easiest ways to destroy your budget AND your credit is by using credit cards. When you’re spending from different sources, it’s easy to forget small purchases and go over your budget. If you can refrain from using credit, or save the cards for emergencies, it will go a long way towards managing your money. Using cash not only helps you resist the temptation to swipe, but it also lets you know exactly where you're at regarding daily spending. With a little restraint and thought, it’s easy to get off the cycle of spending associated with credit cards.
You Can See Your Money
It might not seem like a huge thing, but just the act of holding and seeing the money you’re spending will keep you from spending it frivolously. Paying with cash makes you think differently about your spending habits. You have to physically hand over you money to get what you are purchasing. This will cause you to evaluate closer that purchase because you want to make sure it is worth giving up the money you have. It might seem silly, but it is real psychology, and it’s just another small way that using cash can help you on your way to smart spending.
Track Your Spending
This one takes some forethought and might seem a little over-the-top, but it’s a nice exercise. Get thirty envelopes (or thirty-one), one for each day of the month ahead. Take out enough cash to cover your daily expenses for the month according to your budget and divide it evenly into the envelopes. You can even label the envelopes according to days if you like. Each morning, grab the envelope, and you’ll know exactly what you have for the day. You can leave your cards at home, because you will have enough cash to get you through the day. You'll know exactly how much money you have, and any money you have left over at the end of the month can be added to savings or be used for fun money.
Simplify Your Budget
It kind of goes hand in hand with the rest of the items on this list, but if you break your budget into cash, you’ll know exactly what you spent each day. Not only does this benefit you in the ways mentioned earlier, but it'll also make it easier to manage your money and keeps things realistic. We’d all like to think we only spend $200 on groceries each month, but if you’re paying with cash, you’ll see what you are really spending. You can increase your budget in the places you need it and decrease it in the areas that you don't.
Limit Impulse Purchases
This is a big one for managing your money. You’ve no doubt heard about how little expenses add up, but use cash for a day and you’ll see exactly how much. That $4 coffee you got this morning? It might not seem like much, but if you’re using cash, you’ll quickly see how much of a dent that makes in your wallet when you end up $4 short at the end of the day. Paying with cash will help you change bad habits and better manage your money.
Paying with cash can be a difficult habit to start, but nothing worth while comes easy. Using cash can change your money managing habits for the better, and keep your budget in the black. With a little effort, you’ll become smarter about how you manage money. Try it out, if even for just one day. You really don’t have anything to lose, and you could end up richer in more ways than one.
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