The old-fashioned method of payment of cash has become a thing of the past for most people.
But cash can be used as a great tool to cap your spending on certain discretionary expenses and not blow your budget out of the water.
Entertainment, gifts, and clothing are three main categories of expenses that are most likely to sap your budget.
These are items that are easy to spend money on and people genuinely have no idea how much they spend.
A big reason for this absentmindedness, is the convenience of being able to pay for everything with a card.
It’s so much easier to make a purchase these days, all you need to do is tap your card and walk away. Most of the time you won’t even look to see if you have enough money.
Unfortunately, the cost of this extra convenience is the increase in unnecessary spending.
That’s why the old-fashioned method is an excellent tool.
Paying with cash gives you a visual alert on how much you’re spending and how much you have available to spend.
This instant visual feedback is great, because it allows you to consciously consider your purchasing choices.
For example, leading up to a big event you have planned, you’re more likely to put off certain discretionary expenses (e.g. take-away, clothes) because you can see your limit and you’d rather spend it in the future.
Effective budgeting is often just delaying your expenditures for a more suitable time.
If cash just doesn’t work for you, another method is to create a new bank account and link it to a separate debit card and use that for these expenses.
Either way, coming up with a method that works for you and is completely realistic can help give you an extra boost to your future wealth.
Dallas Davison, Michael Hogue and Ali Hogue.