Cash payment is not something consumers have been practicing lately because a lot has been depending on credit cards, debit cards and even online payment transactions. When you are planning to purchase a big ticket item, you usually use your credit cards. When you are managing your budget and want to put in some funds over to a retirement account, you electronically transfer the amount without even seeing the actual cash.
Even when you are dealing with debt payment in your household budget, you would either make online bill payments or cut the lender a check every month to settle your financial obligations for the month. This leaves out the cash component when you try and manage your monthly budget. There are a few that leaves a few dollars in their budget to be able to pay for small items but that is it.
Even with your everyday needs, you might have a few bills with you for small expenses but for most of your purchases, you would normally whip out your cards. This might lessen the need to count money and wait for change because you just give your card and sign a piece of paper. It makes everything a little easier.
Creditcards.com shares that the average number of cards that is held by a consumer is about 3.7. If you add the possibility of using cash and debit cards, there is a three out of five chance that you would rather use your card than cash. But believe it or not, there are advantages in using cash in paying for various items.
Paying with cash will change your money perspective
Here are few of the realizations you might have when you start using your cash more than your cards. These might even make you want to use your cash more than your credit cards.
- You know how much you have to spend. One of the advantages of using cash in your budget is knowing exactly how much you have. Just like how Businessinsider.com shared the story of a 25 who is serious about budgeting because he wanted to know where his money is going, you can make it easier to do that with cash in terms of how much you have. You can physically count the money yourself. When you go out to have dinner, you know how much you have and what you can use for dinner rather than charging everything on your card. This helps you stay within budget as well.
- You do a double take when spending money. One smart spending decision is to make sure that you are spending correctly. To do this, some people think twice before using their hard-earned money to buy something. Because you are dealing with cash payment, you tend to hold off the purchase because you can see your money leaving your own two hands. This helps add another layer of protection for unnecessary expenses you might easily make.
- You get reacquainted with cash convenience. It might be hard to believe especially if you have been using credit cards for most of your purchases but cash is also convenient to use when you need to buy something. You do not have to wait for the establishment to run your card and wait for approval and sign a piece of paper after which you get your receipt. With cash, you just give it out and wait for your receipt and you’re done.
- You are able to budget your money better. When you have to buy an item and you are using cash payment, you tend to use it a little better because you know exactly how much you can spend. It might also force you to look for lower-priced items just to make the most out of the money you have.
Of course, this does not mean that cash payment trumps the use of your credit cards. There are still advantages that your credit card can give you every time you use them like reward points and even cash rebates. You also get to improve your credit score whenever you use and pay your card purchases on time. But you also need to see the benefits of using cash in your everyday life.
How successful people do it
Your end goal in trying to properly manage your budget with either credit card or cash payments is to be successful with and reach your financial goals. There are some people who has done it and here are a few of the things that they did in order to reach their goals. These lessons are worth looking into to help you reach your own goals.
- Saving for the future is second nature. One of the things successful people do is they understand the importance of saving for their future self. Retirement is inevitable and successful people plan for it early in life. There are retirement factors that you need to take into consideration and one of them is starting early with it. This helps you take advantage of compound interest helping you increase your fund the more years you put into it.
- Recognizing and sticking to their goals. It is one thing to discern what your dreams and goals are in life and with your finances and it is another to stick to it. There are people who finds it a little too difficult to stay on course with the path that they need to take and veer away from their goals. Successful people make it a point to follow through and stay on course and if ever they make mistakes, they get back on track. It can be as simple as using their card instead of a cash payment or buying too much of one investment stock and putting their eggs in one basket. If these happens to you, learn your lesson and get back on track.
- Protecting themselves from financial emergencies. Investopedia.com shares that reserve funds is any amount that you set aside to be able to meet any unexpected costs in the future and successful people take this to heart. They make sure that they have enough of an emergency fund and rainy day fund to tide them through rough financial times in the future. Most experts compute this fund on the amount of expenses the budget has on any given month. They then strive to build a fund that could cover their budget’s expenses for a certain number of months. This is helpful when you lose your job and it takes you a few months to get a new one. Your reserve funds will cover your expenses for a certain number of months until you get your finances in order.
- They practice frugal spending. Successful people are often not too showy with the amount of money they have. They do not buy the latest car model, get the biggest houses or the best gadgets. They make do with what they have and if it is not broken, they do not replace it. Trying to live below your means frees up a lot more in your household budget that you can put towards a financially secure future.
Choosing to stick to cash payment for a few days, weeks or months can open your eyes to multiple benefits of using cash. It is still best to use multiple payment methods depending on different situations but using cash for a short time makes you realize some advantages you might have already forgotten.