Making a change in your spending habits is certainly worth trying if you can't get a grasp on your debt. Just the fact you are making such a conscious effort to cure your debt is great already. Here are 4 reasons carrying cash can help you learn better money habits.
Handing over cash hurts more than anything else.
Who knows if it's the texture, the smell, or the looks--handing out cash is hard, much more real than writing a check or forking over your credit card. Plus, before handing cash over, you have to count it--a very conscious process that tells you exactly how much you are spending.You just can't carry that much cash.
People who are looking for ways to minimize debt are not walking the streets with rolls of hundred dollar bills in their pockets. This way, you avoid spending money for big purchases on a whim. Instead you might have to go home or the bank to get enough cash--giving you a little extra time to rethink that new shiny purchase.-
Credit cards know who is in debt; cash is dumb.
Credit card companies know if you have missed payments before or if you had a bankruptcy two years ago. They are not going to cut you any slack and your interest rate will not look pretty. Cash is the same whether it is in the hands of someone just out of bankruptcy or the hands of Bill Gates. Cash is dumb--it will not know to charge you outrageous fees or high interest rates. -
Cash will not overextend itself for you; credit cards will.
Credit cards will send you letters every month letting you know of their new "zero" percent interest rate and your brand new $10,000 credit line. They are not afraid to tempt you, and unfortunately they are very good at doing so. Go to a store, take out your credit card, and you can literally spend money you don't have. Cash, on the other hand, will let you know how much you have and will let you know as soon as you are out of it. If you don't have the cash, well then you don't have the money. Unfortunately even if you don't have the money, credit cards might make you think you do.
Now, once you feel comfortable dealing with everyday and splurge purchase--transition back to using credit cards for convenience or emergencies only. Those in control can learn to take advantage of these pieces of plastic. Ranging from airline rewards to cash back--credit cards do offer these little perks. But be careful; the temptation of credit cards is not only the spending limits and seemingly endless pool of money--but the rewards and perks can often be temptation enough for those who think they are in control of their finances.
About the Author:
Heindrick So works for a Bay Area Real Estate company that specializes in residential wholesale lending. His work experience is comprised mostly of sales and marketing background which included a high end media sales position at Magnolia Hi-fi. Heindrick is also in his final year of pursuing his Bachelor's Degree in Electrical Engineering at San Jose State University.
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