On a Budget: How Using Cash Can Help You Save

It might sound counter-intuitive but using hard cash can actually help you to spend less.

There is a psychological difference when you hand over physical cash versus when you swipe a card. When you use cash, you understand much more clearly what something really costs. You’re more likely to think carefully about your purchases and consider whether or not you really ought to be spending on a particular item. Using cash means that you’re less likely to overspend.

How do you use cash to help you save?

* Think about the things you tend to overspend on: entertainment, dining out, groceries? Switch to cash-only in those categories. If you habitually overspend on groceries, for example, create your supermarket budget and go shopping with only that amount in cash. That way you’ll be forced to stay within your budget.

* Budget what you’ll need in the categories you plan to switch to cash-only. When you withdraw your money for the month or week, separate your cash into labelled envelopes for each category.

* Refrain from using your debit or credit cards for your cash-only categories. If that means you need to head out shopping without your credit card to avoid temptation, so be it. Your budget will thank you.

* Keep the money separate. It’s never a good idea to roam around with large amounts of cash on your person. If you’re going out for dinner, carry your dining out cash but leave the money for groceries at home. This will also help to keep a lid on impulse buys.

* You can also keep your receipts in each labelled envelope. At the end of the month, you can see exactly what you spent your money on and know if you need to tweak your budget.

Sources: The Balance, The Guardian, New York Times