30 days of not using cash was rough for us. I share what I learned during this time — and turns out I did not spend as wisely as I could have.
Whew! We did it! My husband and I were able to make it 30 days and just stick with using our credit card. I will admit that it was not simple. We started using a credit card for every. single. purchase on September 4th. It is now October 6th and so we have survived the 30 days we said we would.
This was very interesting and we learned a lot from this experience. Not only did we learn about ourselves, we also witnessed first hand what others in America are doing when it comes to the way they use money. It was truly an incredible learning experience. And while I won’t be using credit like that in the future, it did give us new perspective and understanding.
The good thing that came from us using the card was a nice little increase in our credit score. Not that we really “care” what our score says, but it was kind of fun to see it increase as we used credit.
The other thing we realized is that it is really nice to have the card attached to all of our online purchases. We’ve had our card information stolen in the past (read more about that here). We both have determined that we will stick to using our Discover card for the online shopping, just so we don’t have to be without our bank card, should something happen again.
We have been using cash for most of our regular spending since 2010. It is not simple to make a change to what it is you are use to doing.
Part of the reason we had such a difficult time was because it “felt wrong.” We felt like we really did not earn the things we bought. There was a lot of guilt attached to our spending. Yes, we knew that we had the cash in our account and would pay it all off the following month, but in the moment of shopping, we felt enormous guilt.
There were also times when I had to run to the store for just a couple of items and using my credit card for an $8 purchase seemed ridiculous to me. It was very tempting to grab cash and just use it….but I did not. I held true to my commitment to really allow ourselves to see through the process.
This is where it really hit us. We took a look at our spending for the month. While we normally have envelopes where we track everything we spend, we did not have that this last month. The cash in the envelopes dictated our spending and always helped us to stay on budget.
For instance, we knew we had $350 to spend on groceries every two weeks. When we use cash, we knew what we had left to spend just by looking at the envelope and also seeing the cash in the envelope. We knew it was impossible to overspend. There was no way to do it. When the cash was gone, we were done shopping. That really made us look at what we bought and made us more mindful of our spending.
There are many studies that state if people use credit, they will spend up to 20% more than they would if they used cash. We also had readers say that they used credit cards because of the rewards they got! They were earning cash back on the things they were buying anyhow.
When we signed up, we made sure we used a card that offered rewards. We were able to earn 1% cash back on nearly everything and up to 5% cash back on a few select stores.
I want to be completely transparent and will show you our budget in a normal month vs. our overall spending using credit. I will also share our total spent over the month and our cash back. The results may be surprising:
Normal Budget: $700/month
Total Spent in September: $727.24
Over Budget: $27.24
Normal Budget: $200/month
Total Spent in September: $215.72
Over Budget: $15.72
Normal Budget: $250/month
Total Spent in September: $246.14
Under Budget: $3.86
Most of our other envelopes accumulate money and are used when needed (such as clothing and haircuts, for example). We did not have to make any of those purchases during September, so we did not have to take those into consideration.
As a result of using our card, we spent the following:
Total September Spending: $1,189.10
Total September Budget: $1,150.00
Over Budget: $39.01
That may not seem like much, but if we did this every month, we would end up spending $468.12 too much over the course of a year!!
We did earn cash back on our purchases. That was a nice perk. However, based upon our spending for the month, we earned a grand total of $12.42. That was all.
Even if we net our overspending and our cash back, we still ended up spending $26.28 too much during the month (which still would result in more than $300 over our budget over the course of a year).
I know that credit still works for many of you, so you will want to follow me as I get ready to try a new way that you can use credit, cash or even debit and still never end up exceeding your budget. You will want to stay tuned for that.
For our family, cash just works best. We are paying off the card in full this month (which is what good credit card users should always do). We are going back to cash again going forward. However, we will still do our online shopping using our card (and will track that with this new tool we are going to share here soon).
There is not a right nor wrong way to spend money. What matters is that you track track your spending and stay within your budget. That is key. If you use a card for the perks, but you spend more than you budgeted, then you are no further ahead. You’d be better off to take the money you would have saved in using cash and just put it aside.