A few weeks ago, the company I work for started sponsoring classes in managing personal finances. About 20 of us signed up for the 13 week course that teaches how to live on a cash-only basis, how to invest wisely in these turbulent economic times, how to get/stay out of debt, how to achieve financial peace, etc., and how to do this without driving yourself crazy.
The course has been wonderfully insightful - I have been wanting to live on cash-only for a while but just didn't know how to make a sane transition away from this world of plastic. The course lays out a way to move to cash in a way that makes sense AND is liveable for the long-term.
One important thing that I learned both from the class materials and my own personal experience, is that using cash to pay for things rather than plastic really makes me think long and hard about my potential purchases. And because I think more about what I'm considering purchasing, I buy less. According to the author of the program, paying with cash, on average, causes people to spend between 15 and 20% less than they would if they were using plastic or writing checks. The average was 18% less! Having the money in my hands feels "more real", and spending it feels like more of an impact...it brings a reality to my cash flow that I just can't get with plastic, even though I do pay off my credit card balances every month.
Having that cash in hand and knowing there is no more influx until next payday made me realize that a lot of my purchases were wants, not needs. And many of them were wants I wondered if I even wanted (like a DVD I'd watch once and never view again). The hardest part of the process was committing to no more credit cards and then structuring a detailed, realistic budget to support that commitment. But once I made the transition, seeing the many different benefits just cements my resolve to keep living this way.
Now I see some of the benefits of going to cash-only that financial folks don't mention - not only spending less and having more money in the bank, but buying less new stuff which also means leaving a lighter footprint on the Earth. Think about that. Having your finances under control (i.e., being more mindful of your spending) and living on cash can help you buy less stuff and live more "green!"
Some examples....I have noticed that since I am paying for my gasoline with cash, my driving habits have changed considerably. I no longer drive above the speed limit on the highway (driving at 70 MPH uses 20-30% more gas than driving at 50 MPH as an example). I often walk to do my errands rather than drive (I live in town so walking is an option). I am more mindful of combining trips and putting errands on hold until I CAN combine trips, and I am constantly trying to figure out how I can get better mileage or drive less. And no, I haven't become a total tightwad...I still drive to go skiing or hiking (but less often) and am saving money in advance for vacations and trips rather than pay for them with plastic.
My food bills have also dropped a bit...I am stocking up less and planning my menus more closely. While I still commit to buy organic and local, I buy frivolous items (to me, anyway) less, like tortilla chips or imported cheeses, and focus more on "needs" like local and organic salad greens and vegetables. I am also eating out less, and avoiding expensive beverages at coffee shops. While I still enjoy Sunday mornings at the local cafe, I buy a medium-sized drip coffee for $1.25 rather than a mocha for $4.00 or more. Same cafe experience, but less cash out and fewer calories in!
My book and video purchases have dropped substantially - I rely more on the local library now for books, services like NetFlix and RedBox for DVDs, and when I really do "need" a book or video of my own, which is rare, I either buy it used or wait and make a conscious choice to buy new...after checking it out of the library to see if I really still want it.
The point isn't to live a totally frugal, un-fun, monastic life, but to be mindful of where I am directing my money. Being cash-only can bring a consciousness and mindfulness to spending money, and also acquiring "stuff", that using credit cards may be difficult to achieve.