Thursday, June 13, 2013

Money Managed: The Cost of Cash

I've been doing my own little experiment for the about the past 8 months.  I thought what if I skipped online bill pay and using many of the features of my bank account and just paid cash.  Paid bills with cash, used cash at the stores, etc...

It has truly been an eye opening experience.  I've learned a lot, quite a few things I wasn't aware of and have made some changes for the better.

Here's what I've learned from my little experiment.

Cash is hard to part with
You go to Walmart for milk, eggs and shaving cream.  You come back with a new umbrella, 2 cans of paint, 3 dozen soda cans and a cart full of other things you picked up that you didn't even know you needed in your life until you saw them at Walmart and you forgot the milk.  I'm sure you know what I'm talking about!  So you get to the checkout and the total is $104.93.  Handing over plastic credit or debit is a lot easier than forking out a Ben Franklin! Paying with cash makes you think about your purchases and second guess whether or not you really need that item at that price.

I routinely use programs that allow me additional savings that can only track with use of my debit cards, so plastic is great for those reasons.  I probably will not be an all cash purchase kinda gal for this reason, but I sure do make sure that whatever I am purchasing is worth the money I am spending.

Takeaway: Keep a diary of your purchases.  If you look back at your spending and you are not proud of where you put your money, make some adjustments.  I really like Starbucks and a latte a week is perfectly fine for me. But one a day is just too much.  I think about how much I could save and with compounding how much I could have if I kept that money in my pocket.

Paying in Cash Can Be Expensive
The practice of check cashing ad paying bills at bill payment centers nets the owners of these places a pretty penny.  A pretty penny at your expense.  When I quit writing checks and making payments online I would either phone in payments or go to a bill pay center...both cost.  I'd rather keep my money.  Cashing ad hoc checks and payments to me at the check cashing center also is a loss...they keep some of the money. No bueno!

Takeaway: Automate payments that are fixed, such as a car note, insurance payments, mortgage.  Pay variable bills online for free but audit bills first for no hidden charges or fees. Many banks have services where you can deposit checks right from your phone and it's free! I no longer "cash" ad hoc payments, I simply snap an image and deposit it to my account and keep my money!

Save it, Forget it!
Final thoughts, save your money by paying yourself first! I won't go on a long rant how I prefer entrepreneurship to working a traditional job but I will say
when you own your own business you get to pay your expenses first, while Uncle Sam is left to take taxes on the remainder. When you work a job, your taxes are taking out off the top ---ugh!  No matter what you make, save something...put it away and forget it.  And when I say forget it, I mean don't touch it.  I have a "layered savings plan" that works for me and I will be sure to share that in a future post.

Takeaway: Pay yourself first!!

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