I have listened to Dave Ramsey since late 2007. My husband found his TV show on Fox Business one night. He came down the stairs and said “there is this guy on TV you might like”. So I watched and was hooked. Since then the TV show went off the air but in the interim I found the podcasts and listen to them regularly.
Dave Ramsey is a huge advocate of using cash and rages against credit card use. He has rational and logical arguments against this. I agree that they are really are a convenience.
In early 2008 we decided to make the switch from using credit cards to cash. I had used credit cards since I reached theoretical adulthood at 18. I thought it would be a minor change and in some ways it was, but not in others. Here is what I discovered when I made the switch.
Spending cash requires pre-planning. With a credit card I can go anywhere conveniently. If I am to spend cash, I need to go to the bank (or an ATM), and take out the right amount of money. If I don’t take enough out, or even if I do, I am limited. This resulted in the next thing I found.
I spent less. I had always budgeted but as many studies have shown, I spent more by using plastic. There is just simply a bottomless pit of money there. You are limited by your credit card limit but really, who thinks about that when spending? You would only think about that if whatever you were buying would bump up against your limit. If you are buying dinner for $65 and your limit is $3,000, you won’t give a thought to ordering a dessert. You will rationalize that it is only $8 and order that chocolate cake. How much would it cost you to bake a chocolate cake at home and save money? Next to nothing.
I had a hard time parting with my cash. This was quite surprising to me. This made it real. There was more of a connection between “feeling” my spending than with a credit card. I naturally limited myself because I wanted to hang on to the cash. This was probably the biggest benefit I found by doing this.
I stayed on budget. Really this statement is a no brainer. I only had so much cash to spend and when it was gone, I was done. The time I would need to spend to go out of my way to go get more money just wasn’t worth it to me. I am a busy person and didn’t want to do that. Inertia works in my favor there. The trip is not worth it to me. This was a built in buffer or “time out” from spending aimlessly.
The loss of the credit card rewards really didn’t matter. When you are using the cards, you think that you are being smart since you are getting some money back. Not using coupons but using your credit card? That’s okay, you’ll get rewards points. When you stop using them, you find that those rewards are much smaller than what you save by staying on budget.
I felt relieved. I handle all the money in our home. I use Quicken for our finances. Each credit card charge requires me getting a receipt, bringing it home, entering it into the software, reconciling the bill, then paying it on time. It was so liberating not to have to do all of that or keep track of it. I felt free.
I had no purchasing guilt. This is one of the things I heard on Dave’s show and it is real. He says having a budget gives you permission to spend. I agree except that I always had a budget. I didn’t always follow it, but even when I did there was always something “there” and I never noticed it until I switched to cash. It was stress. Stress for spending and not having the tangible cash in my hand. Even though I knew I had enough in my checking account to pay for it because I planned on spending $100 at that store, it was still there. I never knew it until I switched. Then I could feel it leave.
Freedom. I have never looked back. Try it.