Does Cash Work for You?
by Mike and Elizabeth Murphy
“Does cash work for you?” It seems like an odd question, but for some cash doesn’t work. There was a customer who was charged an extra fee for using cash to pay his phone bill. He was told cash takes extra time to process.
In TV commercials for check cards, they show customers breezing through payment until suddenly everything stops because someone wants to pay cash. The implication is that cash is a bad thing!
Cash: A Good Thing
Designed to sell credit and debit cards, these commercials can send dangerous messages. Speed and convenience are nice, but they have led us into the crippling consequences of soaring consumer debt.
Cash is the only thing that keeps us in line. Some people faithfully manage their finances in other ways; we don’t. Many Christians are in bondage to their credit cards, “I don’t know how it got this bad.” We have asked ourselves that same question. It happens because we operate without limits. Credit cards imply limitless spending. Cash has a built-in limit -- when it’s gone, it’s gone.
No store is going to tell you you’re over your budget when you’re using plastic. They will, however, deny you merchandise if you don’t have enough cash. We would love to say we are disciplined enough to limit ourselves, but we aren’t.
Cash at the Cafeteria
We have four children in school. The school district offers a lunch account, which is like a credit card for food service. In elementary school, there is one set meal a child can purchase so the danger of overspending is small. In middle school, children are introduced to ala carte. They can purchase any combination of foods and charge the entire meal. In high school, the options increase with their appetites, so only a few weeks into the school year we found ourselves with a big problem: debt to the school cafeteria! We tried giving our kids a check for a budgeted amount at the beginning of the month, to last four weeks. We still received a bill. We tried sending extra food from home, allowing them to charge a few main items. We still received a bill.
Experts advise skipping the grocery store when you’re hungry because you’ll buy more than you need. The same is true for the school lunch line. We finally agreed to cash only. We now give a weekly lunch allowance in dollar bills on Mondays. They can take the entire amount on Monday and spend at will. We have one who does this and eats well on Mondays and Tuesdays, figuring out how to adapt the rest of the week. We have another one who takes his money daily and supplements it with food from home, and a third who takes his weekly amount all at once and stays within his daily limit. Each works it out differently. Without realizing it, they are learning to budget.
Cash for Regular Purchases
There are some categories we don’t spend from monthly, like clothing. So, we escrow the money by moving the designated amount from our checking to our savings, and record it. When it’s time to buy clothing, we take the cash out of savings and use it to shop. There are some department stores that offer a discount a few times a year if you use their charge card. The beginning of the school year is a popular time for this. The discount can be significant. If you want to take advantage of this, take your cash with you, limiting the amount you spend to your cash. Charge your purchase so you can use the discount, but pay the cash on your credit bill immediately either at the checkout, which many stores allow, or before leaving the building. This isn’t fool proof; I (Elizabeth) still don’t do well with this charging temptation, but it does help.
While credit and debit cards offer convenience and are necessary for travel and Internet purchases, they are not wise for making regular purchases. Studies have shown that even if people pay the entire balance every month they spend significantly more than if they’d used cash -- between 20 and 30 percent more.
Cash also reminds you of your limits. We have certain areas in our budget like groceries, miscellaneous, and entertainment that are “cash only” categories. We take the budgeted amount from our checking in cash every time we get paid and place it in envelopes. When we want to spend something, we check the envelopes to see how much there is. Credit card bills and bank statements, although available online, only arrive in the mail once a month. Weeks can pass between a purchase and the tangible evidence of overspending. An empty envelope is very visible!
Where can cash work for you? Test yourself and your family when the opportunity to spend arises. You may be surprised at your lack of discipline. Examine what changes you can make to a “cash only” status.
We have very little control over the rising costs of gas and food today, so we need to control what we can ourselves. Set limits and then set yourself up to successfully respect them by letting cash work for you.