Did "plasic" kill personal budgeting?

  • Posted by a hidden member.
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    Jan 16, 2009 7:31 PM GMT
    I couldn't help but notice that I pay for EVERYTHING with a card (debit or credit), and usually would buy things and spend more than what I wanted.

    So I did a test, one month I used NOTHING but the debit or credit card! The next month I bought EVERYTHING with cash....
    I found that I thought about things more with the cash sitting in my wallet, dwindling away!

    So my question is....does anyone else know...which is more affective when working on a budget...Using a debit or credit card...or actually usuing cash!?!?

    I am thinking cash right now...mainly cause you can open your wallet and physically see how much is left! where as with "plastic" you are guess for the most part till you balance.
  • Posted by a hidden member.
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    Jan 16, 2009 11:42 PM GMT
    If you use your debit card properly you'd be keeping a log of your balance and transactions...

    I use the envelope system to keep track of money though.
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    Jan 16, 2009 11:59 PM GMT
    I think cash in your wallet does remind u about how much you are spending. There is a budgeting show on TV that illustrates categorized spending by placing cash in jars so the "guests" better know what they are spending and how quickly it can be spent.

    I have found having an expense account imapcts my budgeting more than anything else, unfettered there, creeps into personal spending habits.
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    Jan 17, 2009 12:14 AM GMT
    It's self discipline. I find that the older I get, my priorities change. I want less "stuff". I only buy essentials these days. I eat out once or twice a week. And maybe once or twice a year, I treat myself to a luxury item.

    I don't carry that much cash with me. I only use it when an establishment doesn't accept credit cards. Yup, I charge everything if possible. But I do pay the entire balance off when I get the credit card bill. And my card has a rewards program. So I get something back for my purchases.

    Also, the good thing about using a card is that it shows you how much you spent in a month and where you spent it. So if you notice you spent almost $80 at Starbucks last month, you might think twice about getting a latte on your way to work tomorrow.

  • jmanorlando

    Posts: 205

    Jan 17, 2009 12:31 AM GMT
    Studies show those who only use cash buy less.

    Why?
    Well most people who carry cash tend ration it out. Ie - $100 or $200 for "x" amount of days. So impulse buys or shopping sprees occur less often.

    Big purchases are planned, can you imagine walking into Best Buy with $2,000 cash. You are really going to consider if you want to trade 2 - 4 weeks of work just for a tv. It really does make you think.

    To save money, I take cash to spend and only carry a one credit card (and not a bank card) just in case there is an emergency. So once I see I only have $20 left, I am done unless some attractive guy buys me a drink.

    Another way to manage your money is a weekly cash allowance and setting up a spending journal.

    happy saving.
    Jman
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    Jan 17, 2009 12:42 AM GMT
    It's discipline for individuals. Regulation of the credit card companies. Reversing the culture of I GET REWARDS FOR SPENDING HURF-DURF and that credit cards are for every day purchases.

    This Frontline special will scare the shit out of you: (you can watch the whole thing online)

    http://www.pbs.org/wgbh/pages/frontline/shows/credit/

    Also recommended: Elizabeth Warren walks through the collapse of the middle class from the perspective of decades of statistics and trends: http://www.youtube.com/watch?v=akVL7QY0S8A
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    Jan 17, 2009 12:57 AM GMT
    I personally only use credit cards but never put something on it that I can't pay off that month. I keep a categorized excell sheet on everything I spend. It also includes all my future bills that are constant, and ballpark averages for future bills that change month to month, so that I know what I have to work with. It works fairly well.
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    Jan 17, 2009 12:59 AM GMT
    Credit cards per se are not bad. Neither are debit cards. But our culture has become addicted to shopping and consuming "stuff" we do not need or can afford. I think the latest crisis has changed things in North America perhaps permanently. The fact that 75 million baby boomers are approaching their retirement years is also impacting on spending patterns.
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    Jan 17, 2009 1:04 AM GMT
    I've read about "credit card condoms" that are basically printed warnings on paper sleeves for your credit cards. The warnings serve as reminders to watch your spending habits. Although I don't use credit card condoms, I am in the habit of asking myself -- every time I pick up an item -- "Do I really need this?" Often, it is something I don't need so it goes back on the shelf. I've cut my grocery store budget in half since losing my job months ago. It's amazing what you can accomplish by training yourself.

    In addition to the necessity to save money, I avoid buying things as a form of protest against corporations... and I do enjoy Adbusters.
  • styrgan

    Posts: 2017

    Jan 17, 2009 1:30 AM GMT
    Hmmm...

    I think the right way to look at it is that plastic caused people who were already bad at personal finance to do themselves in.

    I keep careful track of my spending on a transaction register so I never overspend. I use two different credit cards (one for things I need like food and gas and the other for luxury items). I never actually use my debit card because I know I'm so airheaded that I will forget to deduct a purchase and overdraw my account. Everything else, I use prepaid cards (for stuff like Starbucks and tanning) or cash.

    If you know your weaknesses, and set up limits for yourself, plastic can actually be a real help with budgeting.
  • cowboyathlete

    Posts: 1346

    Jan 17, 2009 1:35 AM GMT
    dtothes84 saidI couldn't help but notice that I pay for EVERYTHING with a card (debit or credit), and usually would buy things and spend more than what I wanted.

    So I did a test, one month I used NOTHING but the debit or credit card! The next month I bought EVERYTHING with cash....
    I found that I thought about things more with the cash sitting in my wallet, dwindling away!

    So my question is....does anyone else know...which is more affective when working on a budget...Using a debit or credit card...or actually usuing cash!?!?

    I am thinking cash right now...mainly cause you can open your wallet and physically see how much is left! where as with "plastic" you are guess for the most part till you balance.
    You really can't put debit and credit cards into the same category. Debit cards go straight out of your bank account and there is no balance in the same sense as there is with a credit card.
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    Jan 17, 2009 1:36 AM GMT
    cat
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    Jan 17, 2009 1:37 AM GMT
    cat
  • Posted by a hidden member.
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    Jan 17, 2009 4:14 AM GMT
    cowboyathlete said
    You really can't put debit and credit cards into the same category. Debit cards go straight out of your bank account and there is no balance in the same sense as there is with a credit card.


    Actually you can!
    The point I guess Iam making with it is that...lets say you leave for the day to go wherever, and you take (it don't matter) a credit and or debit card.....the idea is still the same...you never REALLY know how much to the cent you have available for spending...and well I dont' really record a transaction till the end of the day...so if you make many....you won't really know HOW much you spent that day! thus leading to over spending!

    Cool answers tho guys!
    I just thought it was odd....and this topic came up in my finance class the other day!