I’ve recently adopted the habit of paying cash for just about everything in my everyday personal expenses. This came on the back of a conversation with a work colleague who swears by it.
Despite being so simple, it is actually surprisingly counter-intuitive to implement. Everything in society today is set up to be paid with online transactions or through points of sale. The effect of this is that we end up losing control of our personal finances through the slippage of not having to hold money in our hands.
So immediately I can see the benefit. It is hard and requires you to be organised. Two things that don’t sit comfortably on most people’s shoulders when it comes to spending habits.
The lady who suggested this to me swears by it. She’s spent her life living by this maxim and it has enabled her to amass quite the multitude. So I was interested to see for myself whether the effects of this habit could eventually be counter-inflationary.
Don’t get me wrong: I still use banking for the odd expense, mostly business transactions that I will need to code in Xero for which it helps to have a digital expense record. But with everything else, everything personal, I just pay by cash. I get $200 out or so each week and this pays for everything from my weekly supermarket shop to that sneaky coffee I have while at work.
The results so far, while not mind-blowing, have been surprisingly good. It is far easier to keep track of exactly how much you are spending and to impose daily limits. You are also far more likely to rationalise whether you “need” to have that extra coffee if you are paying actual cash for it, rather than some invisible bank credit.
It also helps the miscellaneous expenses stick out like a sore thumb when you review your online accounts. You know: that gym membership you bought and never used but still haven’t organised yourself to cancel. Well, that expense is more likely to disappear now that it’s the only thing going out of your account each week.
When you reach the end of the week and you realise that you have underspent, not overspent, your budget, then you have two choices. You can either roll over the surplus into your next week’s expenditure, or you can simply top yourself up to your weekly budget (in my case, $200). The process then becomes a game with yourself to see how much you can save. I have been doing this for a little while now, and last week I only spent around $175 – so I withdrew $180 instead of $200, and kept the spare coins for next week’s luxuries – a perfect compromise.
Before I tried this I thought that such a habit would simply lead me to spend more, with the money constantly sitting in my wallet, but now I know better. Now I know how powerful this small thing can be. I enjoy the way that minor learnings like this can lead to endless changes in life.
