4 reasons to not use credit cards

Today’s guest post was written by blogger, Jana Lynch. Jana and I are both living a very counter-culture lifestyle and loving every minute of it.

Photo by Daniel Oines

Photo by Daniel Oines CC

 

Confession: I don’t use credit cards. Neither does my husband. We survive fine, too.

We stopped using them about seven years ago when we decided to pay off all our credit card debt. We realized how out of control we were when we used them, and we realized we couldn’t be trusted with them in our wallets. It was how we got into debt in the first place.

At first it was difficult; we had become accustomed to charging any and everything and using cash or our debit cards seemed…weird. But we knew what we stood to gain if we refrained from using them so we stood firm in our resolve. It worked, too, because we paid off our credit card debt and have managed to remain that way for 3 years. And, seven years after our initial commitment, I’ve realized that, in addition to the debt, there are a few things I don’t miss about credit cards.

For instance:

  1. Having a bulky wallet. Carrying all those cards around bogged down my wallet and made my purse heavier than it needed to be. I’m pretty much resigned to having a ridiculously large mom purse, but I can slim down my wallet. Now I can find all the important cards (like my insurance or library card) when I need them and my purse is lighter.
  2. All those bills to pay and fees for late payments. I am not the most organize person and, even with having a list of bills written down, I sometimes manage to forget one. When I had credit card debt, it was more bills to remember to pay and not paying those had serious consequences. Plus, I’m fairly lazy and want to spend as little time as possible paying bills. Without the credit cards, that happens.
  3. One less worry about ID theft. Last year, my alma mater’s system was breached and identities dating back to when I was in school (mid-late 90s/early 00s) were compromised. Then there were all those breaches at Target and other stores I can’t think of right now. Not having credit cards, and not having to remember which card I used at which store, gives my paranoid brain a little peace of mind. It’s one card to keep track of, and it’s a debit, so I know instantly if there’s a problem. No waiting for a statement to figure that out.
  4. Less bills to pay. I’ll admit that I am not great at remembering to pay bills on time. I have the majority of our bills set up for an autodeduction and the ones that aren’t (utility bills) get paid once a month, on one particular payday. When there are credit card bills due, it’s one more thing to remember to pay, it’s more money going to someone else than staying in my account, and it’s one more chance to make a mistake that might, quite literally, cost us. Without them, it’s easier to pay the bills and I’m more efficient. Plus, the extra money helps out with other expenses.

This is not to say that credit cards are evil. If you can use them properly, then have it. I just know, and have a proven track record attesting to it, that I can’t. So I stay away.

Getting out of debt, and getting credit cards out of my life, was one of the smartest choices I made. And while it’s not easy, refraining from credit card use, I do it. I would love to walk into a store and buy all the things and not worry about how I’m going to pay for them that day. But I also know the stress it’ll cause isn’t worth it.

So I keep the credit cards at home, locked away.

Everyone is better off.

How about you? Do you use credit cards? Why or why not?

Jana Lynch is a blogger at Jana Says, where she talks about everything from parenting to pop culture to mental health issues, and runs the blogger mentoring program Bloggers Helping Bloggers. You can stop by and say hi on Facebook, Twitter, Pinterest, and Instagram.

 

An easy way to immediately curb your spending

Curb your spending

 

There are two items that traditionally keep people from getting ahead financially: income and/or spending. While there are a number of things you can do to increase you income, generally those changes are not immediate. Spending is something you do have immediate control over. With debit cards and credit cards, it’s very easy to overspend. There is a very easy way to curb your spending.

Use cash.

Yup, that is the brilliance of the plan. Put cash in an envelope for the categories you tend to overspend on. One category that we had a lot of trouble with in the beginning was food. It is so easy to overspend on groceries and eating out. Once we started using cash and I had to stare down that envelope, we quickly got our spending under control.

Every two weeks when we got paid, we would take out enough cash for food for the next two weeks. Once that money was gone, we had to make due with whatever was left in the house. I remember one night, after we ran out of money before the next pay day, I made a box of mac and cheese, a box of stuffing and a can of peas for dinner. Did I mention we quickly learned to make that money last for the entire two weeks?

If you are worried about carrying a lot of cash, just carry the cash you need. Only carry your grocery money when you plan to go grocery shopping. This will also stop you from making unplanned trips, which generally lead to overspending. Need to pick up a few things after work? Just take $10 or $20 with you, again to limit impulse items.

What if you buy a lot online? Cash won’t work for that. Well, there are some alternatives.

  • Most sites accept Paypal. Transfer money to your Paypal account to limit your spending.
  • Purchase a prepaid debit card at Wal-Mart, Target or another local retailer. These are similar to gift cards but can be used anywhere Visa or Mastercard are accepted. Load your budget onto the card. You can reload it when you’ve got more money to budget for that category.
  • Use gift cards. If you shop at Amazon or another online retailer on a regular basis, purchase a gift card for that retailer to limit your spending.
  • If your bank allows you to have a free checking account, open another account for those spending items and use that account to limit your spending.

These methods to not require you to do extensive budget tracking, but can help you save a tremendous amount of money each month. Give it a try. You’ll be amazed how easy it can be to curb your spending.

My little cash experiment

I’ll start by saying that I really want to go on vacation. A real vacation. Over the past twelve years, Jeff and I have gone on one real vacation. That was our wedding in Vegas. All of our other vacations have been local, a family visit or a few days for an event. I decided that this year, I would start saving for a major vacation. I want to take a cruise to Italy. I’ve always wanted to see Italy and I’ve been looking at the cruises that visit the country. It looks like a lovely idea and it’s a lot of money.

Since we are still paying down debt, I did not want to divert any of those funds for the trip. I needed to find a new way to cut back my spending to save for this. In January, I started using cash again. I’ve done this periodically through the years to help tame my spending but always went back to the debt card. This time, I put my debt card away (aka one of the cats stole it) and have been using cash for the past month.

Each time we get paid, I take out a certain amount for gas, groceries, eating out and other things we’ll need for the next two weeks. I based this amount on what we’ve been spending in the past using the debit card. I can only use the cash I have. Once it’s gone, I’m done spending. When I’m about to take out money for the next two weeks, I count up how much money I have left. I deduct that amount from what I take out of the bank, bringing my total back to the fixed amount I should start my two weeks with. The money I saved goes into my vacation account.

In the first month, I saved $97.00. I’ve got a few days left until we get paid again and I’ve still got about $60 left. I’m going to need a few things this week and gas but I’m hoping to still put $30 in the account. I always tend to spend more at the beginning of the month, since that’s when we make the big trip to the warehouse club to stock up on cat food, litter and other things we need for the month. The majority of the money I put in the savings account last month was from the 2nd half of the month. I would be thrilled to put $30 in for the first 2 weeks.

I know $100 doesn’t seem like a lot, but when your total biweekly allotment is $300, I cut my discretionary spending for a four week period my over 16%. Not too shabby. It’s funny when you are holding something in your hand and realize that this could be money for Italy. I’ve put a lot of things back in the past month.

Credit and debit card issuers state that the average person spends 8-10% more when using plastic. I can’t tell you how many times I’ve made a purchase and not even known how much I spent. I know I had the money to cover it, so who cares right?

I know that if I would have had my debit card on me, I would have purchased a new vacuum last month. Mine needs a ton of repairs and it would be more cost effective to get a new one. Instead, I bought an $8 broom and dust pan. I’ve got all hardwood floors and it actually takes me less time to sweep, plus the broom gets into all the crevices in the floor. Oh how we think about things when we’ve got greenbacks in the wallet and a cruise on the mind!

Starting a small business

A friend of mine asked me a question relating to starting a small side business via Facebook last week. I thought that this might be a good weekly series. Many people have small side businesses or have thought about starting a small business, but just aren’t sure where to start or how to maintain their records. Over the next few weeks, I’ll be addressing some of the things to think about when starting and running a small business. If you have questions regarding small businesses, feel free to ask them in this post or send me an email.

My first rule in small business is start it with cash. If you can not start a business without going into debt, this might not be the right direction for you to go into. 80% of small businesses fail. That doesn’t mean that your small business will fail, but I don’t want you getting into debt over it. Do your research, see how much start up money you need and start saving. You may not be able to go all out when you start your business, but starting slow and growing with cash will leave you in a much better financial situation.

My friend had asked me about getting a credit card to start her business because the representative she was working with said she could get miles or points for her purchases. Plus, it would help her keep all of her expenses seperate. You can do all this without paying any annual fees or interest charges. Open a free small business checking account. I work with Webster Bank in Connecticut. I get free checking, plus my debit card earns rewards points. Just open a checking account in the business’ name and get a debit card if you need one.

Here is my pet peeve with small business owners. Your business account is only for business transactions. Your personal account is only for personal transactions. Keep them seperate. If you want to take money out of your business because you have profit, write yourself a check and deposit that check into your personal account. If your business is low on cash, write a personal check to the business and deposit the money into your business account. Once you start mingling your funds, it becomes very difficult to keep everything straight for tax purposes. Keep the business stuff in the business account and that’s it.

When you keep your business finances separate, it makes doing business a lot easier, especially when tax time comes around.

Making a list, checking it twice

When I posted about how much I hate cash I got a number of comments on twitter and facebook with the fact that Dave Ramsey says you spent 12% to 18% more when using plastic than when using cash. Here is how to get around that:

1. Have a very strict budget and update it throughout the month as you are spending. Pick a day each week to go online with your bank and figure out how much you spent in each category. I use QuickBooks for this, but there are a number of other programs out there that are less expensive. You can even use a spreadsheet if you want and download your bank activity into the spreadsheet, then add a column for category. Fill in categories and then sort by that column. See, free budgeting software right there on your computer! I update my budget before each shopping trip so I know exactly what I can spend.

2. Always have a list when you shop. Always. Even when going to the mall, I have a list of what I am looking to buy and my budget. That way, I know how much I can spend. The most important places to have a list are Wal-mart/Target and the warehouse club, if you belong to one. It’s so easy to pick up things you don’t need.

3. Limit the number of trips to the store. Every time you go to the store, you increase your chances of purchasing impulse items. Make a list during the week, making sure you watch for things that are running low before you actually run out of them. Running out of cat food will instantly send you to the store. Put it on your list before running out. I also find psychologically people feel better when they go to a store and come out with multiple items. I watch a lot of people. It’s very rare that people will walk out of Wal-mart or Target with one item. Therefore, add items to your list as you progress through the week and only go once.

4. Keep your list in a high traffic area. I use my fridge. I usually have two magnetic pads on my fridge, one for groceries and one for nongroceries. I do not purchase nongrocery items at the grocery store unless there is a MEGA SALE, which doesn’t happen very often. Nongrocery items are generally a lot more expensive at the grocery store. It’s better to buy them at Wal-Mart or Target. Sometimes pharmacies will also have MEGA SALES on these types of items. So stay on the look out.

5. Always keep your coupons with you. You never know when an item from your grocery list might show up on sale at Wal-Mart, Target or the pharmacy and they all except coupons.

If you can keep your eye on the prize (staying within budget), you can avoid spending that extra cash without having to pay with cash. That makes me happy. I still hate cash.

Are you a list shopper?

P.S. If you would like to friend me on facebook, please put klingtocash in the message box. I get a lot of friend requests and I want to make sure I don’t miss any of my readers.


Free Grocery Coupons

I hate cash

I’ve posted here about trying to use cash for certain things, like groceries, because Dave Ramsey recommends it in FPU. Well, I’m here to tell you that I have given up on cash. I use my debit card for everything except purchases at small businesses that will accept checks. I write checks to save the business the credit card processing fees and I can write a check pretty fast. I hate using cash. I don’t like having cash on me, it’s slow and it’s more difficult to track. With my debit card, I know I spent $2 on a coffee and $1.50 on a copy of the WSJ. With cash, I only know I spent $3.50 today. With my debit card, I don’t have to count out the money and then hand it to the cashier and wait to get change back.  I know that statistics show that people tend to pay more with debit cards, but I’m on a very strict budget and have to stay within that budget. I am very good at sticking to that budget.

So, I tried. The only things I’m going to use cash for are large purchases. That way I can flash the cash to get a better deal. Other than that, it’s debit all the way.

How do you feel about cash? Does it drive you crazy? What’s your favorite way to pay for things?