Finance Roll

It's a well established fact that when people purchase things using any payment form OTHER THAN cash, they tend to spend more money. I always figured that this fact didn't apply to me because I was a careful shopper. BUT, can I just say that is NOT true!!!

I generally keep to a budget of $300 per month for five of us (how I do it is another article). I would make my grocery list and keep my budget in the back of my mind. I would always use my debit card for shopping and never paid cash.

Many months, I would think that I had stayed within my budget but would quickly tally things up and realize I had gone over. On other months, I would come in under my budget, but I never had anything to show for it, like rolling that saved money over into a vacation fund, or putting a little extra principal down on a loan.

This month, I decided to go to a "cash" only or envelope system for my grocery money and conduct a little experiment, with ME as the guinea pig. I placed my grocery budget money for two weeks ($150) into an envelope and then went shopping with my grocery list in hand. I honestly thought I would never notice a difference in how I shopped, because hey, I was a careful shopper, right?

What an eye-opening experience! At first, I went along shopping away and noticing a few specials I had missed and threw those in as well. Then, the realization hit me. I had only so much money! I couldn't just rely on my debit card! I took out my calculator and began adding up my purchases, keeping the fact that this $150 had to go two weeks. I put back a few items that were priced well, but not well enough. I cut down on how much I stocked up on a few other items. It wasn't like we NEEDED them, but I wanted them. What I wanted and needed more, though, was to stay within my budget.

As the number on the calculator grew, I stopped going down EACH aisle. I looked at my list of needs and went down JUST the aisles I had to, thus avoiding those sale signs that lured me to grab unneeded items. I would NOT be trapped into buying something that was NOT a need and NOT on my list. I had a hardcore and physical reminder of my budget-cash!

At the end of the trip, I had a rough idea of my bill, without tax. Two points to make about the check out. Paying cash and physically counting out my hard-earned dollars HURT. It sure made me think about each thing in those bags. I also was very careful to check my receipt and make sure I wasn't paying out too much of my hard-earned cash. My cashier had difficulty completing a transaction in my groceries involving a rain check. When I examined by receipt, I found I was overcharged by $8.47! A quick trip to the courtesy desk rectified the situation, and placing $8.47 in cash back INTO my envelope felt good.

So, although my experiment is still in its first weeks, I can safely say that I was NOT immune to the fact that shoppers who pay with debit, credit and check buy more than cash shoppers. I also feel a great satisfaction knowing that on months when I come in lower than my $300 budget, I can either bank the extra, roll it over for months when I want or need to do bigger stock up trips, OR make a principal only payment on a loan. There is something better about physically handling your cash versus moving it around electronically through a debit card or check.

So, is there a part of your budget that might benefit from paying cash? The morning coffee trip, an expensive vice like smoking or clothes shopping? Think about it! Paying cash might be the way to reign in some expenses.