Should I Use Cash or Plastic to Pay for This?

This post is optional supporting material for users of the Free Advanced Finances Tracking and Analysis Spreadsheet I have for free downloading on this site. However, it should be useful for anyone who wants to think a bit more about their personal expenditures to get a new perspective on it.

One of the things my Finances Tracking and Analysis Spreadsheet allows you to do is track and analyze how you paid for your life expenses. You can specify up to ten categories, with three umbrella categories, the latter of which I would highly recommend you choose some grouping of your “plastic” purposes, on credit and/or debit cards.

There have been many studies that have shown you spend less when cash flows through your hands. Here, here and here are among just a few articles, though I have seen the actual studies in journals and judged them to be reliable. You have to run to the bank all the time to replenish your supply. When you swipe plastic that is so convenient to pay off, you rarely ever have an idea of what you’re spending between periods of payments. This spreadsheet can help with the latter if you track it, but it’s still too late, after the purchase. You’d either have to reassess when your head is more level rather than in the heat of shopping, which is a benefit on its own of using this spreadsheet, but you’ll still likely be reluctant to go return the thing if it doesn’t seem as good a purchase when you enter it compared to when you bought it.

You will have to be pretty disciplined if you’re going to use plastic and spend as little as you’re going to spend cash. We’re not talking about going broke here, necessarily, even. Some people spend on plastic for points and pay it all off every month, able to afford it, but whether they could have spent less using cash is the real debate here.

I haven’t seen any evidence for cheques, but I don’t believe it’s much different because it’s still a matter of convenience. You do get to see the cheque numbers go up and through as you use them, though, so there is some reminder of frequent use. It’s the same thing of constant reminders and inconvenience that will help you eat less if you used smaller plates, make it a tad harder to get food and leave remainders out to be seen, like bones from chicken wings.

Given I believe that change is best accomplished one step at a time, I would adjust to being disciplined to record things in my spreadsheet first, to see how you spend with cash versus plastic. Once you have that routine down, and I don’t mean looking at your statement and filling in the blanks long after you made your purchases, start spending cash more often, where you can. Even do this for some big purchases, even if it makes you look or feel a bit like a drug dealer to pay hundreds of dollar purchases with raw cash. 🙂

That experience will stay with you a lot longer than swiping a credit card, I guarantee you that. And if you start feeling like a drug dealer too often through any phase, you know what? Consider becoming one! 😉

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