The Power of Ca$h!

Credit card history in America dates back to the 1950's when the Diner's Club Card was issued for the sole purpose of using it in restaurants in New York City as a fast way of payment. By the mid-1970's credit cards were so popular that the united states congress stepped in to regulate the systems. Today, the average American family has around $16,000.00 in Consumer debt, not including mortgages.

The average household debt rate is up 41% since 1998. Looking at the statistics, it is time to get back to basics and start using cool hard cash for purchases again. Living the plastic dream is not working well for the average American family. Paying cash for purchases is a sobering way to feel your budget. At the end of the month if nothing is left then some budget rearranging needs to be done. 

The Cash Strategy:

The cash strategy should be used for non-fixed costs items such as: food, movies, hair cuts and really shopping of any kind. The utility bills, rent, mortgage, car payments etc. should be paid by electronic funds transfer, directly from your account to avoid the extra cost and hassle of checks, stamps and mailing. Also, this avoids late payment fees, which usually involve a penalty or an interest rate increase. Any and all savings should also be taken directly out of the paycheck to avoid being spent.  

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Once all the monthly expenses and planned savings are removed from the account budget, find out how much money is needed for the week and take it out in cash. The cash should be in the wallet, to be spent on anything and everything you budget for that week. By mid-week, if there is no money left in the wallet then there is something wrong with the budget.

Cash does not lie. If it is there it is there and if not then there is nothing to spend. The good news is that even if by some crazy chance no money is left in the wallet at the end of the week, at least zero money is better than debt that costs an extra 18% in interest payments on a credit card or 7%-9% on a bank line of credit. Having zero money is better than minus money.  
 

Tips and Tricks:

• Gas money should be left in the bank account if you use those automatic pumps that take debit cards.
• Take out spending money on a weekly basis instead of monthly, just in case the wallet gets lost, misplaced or stolen.

• Look ahead to the near future: if your shoes are getting a little worn, save a little from your cash every week until you can easily pay cash for your shoes. Same for car repairs, vacations, a newer car and gadgets.

A few months later:

After a few months of using the cash system and learning where the budget needs tweaking, by all means go back to using debit cards. They are easy and safe. Just watch out for the fees attached. Also, for the very disciplined budgeter, there are some store credit cards that give 1% cash back when you shop at their stores with their card. This is a good system if the store is a grocery or other type of store that is frequented a lot. However, it is not so beneficial if the store sells only items that are needed maybe once or twice in a lifetime, such as: furniture, appliances, etc.. 

Frugal Fanatic Tip:  

Having cash on hand is a great way to negotiate prices down. It is difficult to talk a sales person into lowering her price when waving around a peace of plastic. However, place some hard currency in front of a sales person or owner and they are more likely to budge on the price. This works especially well on furniture, appliances, jewelery and most definitely cars.