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Reader Diane sent me a darn good question via a comment on my post about approaching the end of my credit card ban. “When the experiment is over, will you go back to spending as before or will you make some changes,” Diane asked. “Either way, why?” My month-long cash-only spending experiment definitely changed the way I will spend money. Going forward I’m going to make three changes.
- I’m no longer going to rely strictly on credit cards because I scrutinize purchases more with cash. My goal is to use cash for everything under $50, which are the purchases that have the most wiggle room. Think I’m giving up a ton of credit cards perks? During the past seven months I earned an average of $16 in cash-back rewards each month. With cash I spent $200 less. That’s a much bigger perk!
- I’m going to strictly use cash for groceries because I spend so much more carefully with greenbacks. My dollars are finite no matter how I pay, but using cash makes my limits feel more apparent.
- I’m going to leave my credit card at home unless I specifically plan to use it. The more I pre-think about purchases before I leave home, the more likely I am to spend less.
Before the experiment I used to use cash for about 10% of my purchases and credit for the other 90%. Now I think my ratio is going to be closer to 60/40. What’s your ratio?
Welcome to Bargain Babe! I’m Mara, and I’m so glad you’re here. I am an obsessive bargain hunter and penny pincher, and I am determined to live a full life without EVER paying full price. 
My ratio would be about 99:1 for credit card use versus cash. I only really use cash for parking meters and laundry machines.
The main motivation for using credit for everything is to streamline my money-tracking process. I use mint.com to track all my finances and everything just comes out cleanly and accurately if I simply use cards over cash.
With financial software, you can easily track your progress with your monthly budget and get all kinds of cool charts and graphs to view your expenditures by week, month, or year. The software can also tell you the balance of all your accounts and investments in one place! This type of tracking has helped me enormously with being able to plan and fine-tune my budget.
Bonus: mint.com is free!
I think your rationale for a mix of cash and credit makes sense, and I feel you’ll be successful in better managing your budget. Thinking and planning ahead almost always makes good sense, and paying cash for groceries usually keeps one closer to the list for purchases. Congrats on the success you had this past month!
P.S. Since I’m not a techie-type person, and am also “of a certain age” where I have fewer needs, using computer programs for budget purposes doesn’t work for me. I also do not pay my bills on-line, even though my techie son says that’s silly.
i use the Costco American Express for every purchase over $5 where American Express cards are accepted. Rebates are 1% of general purchases, 2% of travel purchases and 3% at restaurants and gas stations. Last year I received a $700 rebate! I still carry the MasterCard for use at places where American Express isn’t accepted and always have a small amount of cash on hand for small purchases but overall, the rebate is worth it.
Ditto the comment about Mint. When I log in, it grabs updates from all of my accounts (checking, savings, 401k, investments, credit cards) and tells me with a graph how I am spending against my monthly budget overall and by categories. It emails me reminders when bills are due and weekly summaries of my financial status. Hard to believe that they do all of this for free!
Good question and good answer, let us have a follow-up in 3 and 6 months. Think I’ll look into mint.com, you’ve made me curious on where my money goes.
My ratio is 100% I guess. I use my debit card for all my purchases, I hardly carry cash. My philosophy has become “if I can’t pay cash for it, do I really need it?” Larger ticket items usually have layaway or financing as an option. This lifestyle of spending definitely does have you watching how you spend!
I notice all the credit card cashback addicts missed the point where she said she spent 200 less vs. getting 16 cash back with credit. Ccs are a fine tool for some things, but when it comes to everyday spending your mind will start to work differently if you have a set amount of cash vs. a credit card with a big limit. You have to stick with the program for a while to break the addiction of swiping/feeling like your getting something for nothing (which is similair to a gambling mentality) but if you do you’ll save more money than you would get from the credit card programs–it’s just a little less fun and convenient. As far as tracking and having shiny neat graphs on mint, etc– this my be a sign that you have mild ocd….or that you are just taking pleasure in the aesthetics of data organization(mint is a pretty site)…which is fine but I doubt it really helps your bottom line as much as a simple cash budget would.
Ditto what Sam said! He expressed my take on this much better than I did. I found that it took quite some time to truly get into the cash only mode, and have never regretted sticking with it.