The number one reason people blow their budget is that they overspend. It happens to many people, but there is a simple trick anyone can try that will help prevent overspending month after month.
The number one way to get control of your money is to, of course, have a workable budget. But, that is just one part of being more successful with money. You have to also never overspend.
Saying this is easier said than done for many. But, there is one trick I’ve used for years that helps me never overspend. In fact, if you use this, it is impossible to do.
THE #1 TRICK TO MAKE SURE YOU NEVER OVERSPEND
CASH
Yep. That is my trick to never overspending! If you think about it, if you use cash, you can’t overspend, right? After all, if you have only $100 to spend, you can’t spend $101. It’s impossible, right?
For the past ten years, we’ve lived with a cash budget. We never overspend. Ever.
For us, it is not an issue of discipline, but more a matter of exercising self-control. We think twice before we shop. Sure, we could use a credit card. However, we choose to let the finances to dictate our spending instead of plastic allowing us to go over our budget (even if by only a few dollars).
I do agree that not all ideas work for everyone, but there are reasons why it is best to use cash (and what to do to make it work). I always like to challenge someone who says that they could “never live on a cash budget” to try it.
Track Your Spending
You need to keep track every cent you spend. If you get cash and use it as you please, without tracking it, I agree that it is far too easy to go through it quickly.
However, if you keep it in an envelope and mark it for the item intended (example groceries), and then write down the amount you spend, you will be able to track how you are doing your spending. You also know how much you have left.
Paying with cash forces, you think twice about that extra latte or a new pair of shoes you want to get. When the cash is gone – you can’t buy.
Negotiating Power
Not only does cash prevent your from overspending, but it is also a powerful negotiating tool. When you use cash for major purchases, you can negotiate prices. This is something that many do not realize. When stores price items, such as televisions, they mark them up to cover the credit fees they must pay for accepting your credit card. When you pay with cash, the store doesn’t have this additional charge.
My husband and I did this when we purchased our new television and a stand for our family room a couple of years ago. We saved the money and went to a local store. We found the items we wanted, and I simply asked him what deal could they offer me if I paid them in cash. Not a check. Not a debit. But cold. Hard. Cash.
He left and asked his manager and came back with a 5% discount. That may not sound like much, but on a $749 television that saved us $37.40. That was my $37.40. Not only did we save, but when we got home and set up the new items, it felt different. We owned it. There wouldn’t be a bill coming in a month. We would not be rushing to pay it off before the interest-free introductory period ended. We did it. We worked hard and saved, and the reward was ours to enjoy.
I believe that it was partly more enjoyable as it was the very first item we bought after we had paid off our debt. We had a small 25″ tube television that we used for over two years when are larger one was damaged during a lightning storm.
We could have rushed out and bought something right away, but we would have needed to use our emergency fund. A television is a want – not a need. For us, it was not a true emergency. We had a TV that would work. There was no need to empty our savings account just for a television.
No interest charges – ever
If you use a credit card, it can be tempting to make only the minimum payment each month. For example, a $5,000 credit card debt at 22% interest, could cost you close to $13,000!! It would take nearly 11 years to pay it if in full if you make the minimum payment of $100 a month. Your interest would be more than $7600 alone!!
I do know that many of you are disciplined enough to pay down your cards every month — which is great! However, if you know that you are tempted to fall into the minimum payment trap, using cash is a wiser way to go as you will never find yourself paying more than the original purchase price.
Emotion
I’ll just say it. Spending cash hurts. There is something about handing over a stack of twenty dollar bills to pay for your groceries vs. swiping a card. It is the physical act of actually handing someone the money you worked hard to earn.
Think back to when you were younger. You probably saved your money once for that big purchase. While you worked hard, it was sad to see all of that money leave your wallet.
The same is true for an adult. When you use cash, you are often more aware of your spending as there is no way you can overspend. The worst thing is when you add too much to the cart and have to put something back at checkout as you do not have enough money.
It just makes you think twice before you buy something. That is a trick I think most of us could use in our money-saving arsenal.
