Does Paying With Cash Make Us Spend Differently
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Does Paying With Cash Make Us Spend Differently?

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Today I'm asking whether paying with cash makes us spend differently. I'm sharing a few of my stories and can't wait to hear yours!

“You spend more when you pay with plastic.” It’s a statement that I’ve heard quite often, and is perfect for today’s conversation of whether paying with cash makes us spend differently.

I’ll be the first to admit that I pay with my card most of the time; it’s just easier. But a few days ago, I found myself with the option to pay with cash or my card…

I was on my way to grab a meal at a fast food restaurant. I placed my order and then reached into my purse for payment. I always have my card, but this time I also had cash. That’s when the quagmire began. I wrestled for a few minutes (okay, it was probably only a few seconds) and finally decided to pay with my card. After all, I didn’t want to give up my cash.

Does Paying With Cash Make Us Spend Differently?

Maybe it’s just me, but when I have a $20 bill, I’m very protective of what I’m going to spend it on. If it’s an item that’s only $1, I’m definitely not breaking my $20 bill because it’s not worth it. Please tell me that someone else relates with me!?!

Have you ever shopped with cash at the grocery store? I’ve been there and I can promise you that you’ll definitely think twice about what you put in your buggy! Even when following a budget, it’s much easier to pay with cards over cash. There’s always a bit of wiggle room when paying with your card, but not with cash. I can only imagine how utterly embarrassing it would be to not having enough cash at the register (especially knowing that you would have had enough if you’d paid with your card).

If you’ve never shopped with cash, I highly encourage you to give it shot. I guarantee you’ll spend your hard earned money a lot differently and will think twice about what you purchase.

What are your thoughts? Do you think paying with cash makes us spend differently?

Thrifty T

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  1. Shannon @ Of The Hearth
    Shannon @ Of The Hearth01-11-2014

    Interesting question!
    I think that individuals who have credit card debt or individuals who struggle to resist impulse buys may benefit a lot from using cash.
    My husband and I rarely use cash and actually benefit from using our credit cards. We pay the cards off every month (so no interest is charged). Neither of the cards have an annual fee and both offer rewards points for purchases placed on the cards. Because we’re disciplined enough to stay within budget even though we use the cards and we don’t carry balances on them, we actually make money in rewards points.
    Like I said earlier, though, if credit card debt or staying within budget is an issue, then using cash is likely a good idea!

    • Tshanina Peterson
      Tshanina Peterson01-11-2014

      Sadly, most people people don’t have the discipline to pay off their credit cards each month or even resist impulse buys. You’re right – these are people that should be using cash!

      It sounds like you and your husband have found a system that works for you. I love it!

      Thanks for stopping by and joining the conversation Shannon!

  2. Lydia @ The Thrifty Frugal Mom
    Lydia @ The Thrifty Frugal Mom01-14-2014

    I agree with Shannon, but I also agree that those of us who are like that are probably not the norm and are actually probably pretty unusual!

    We rarely pay with cash because we find it more inconvenient and harder to keep track of our spending for our budget. If you are budgeting and using cash you pretty much have to use an envelope system and that just seemed like more hassle for us since we pay off our cards in full every month and have been staying within our budget no problem.

    In fact, the few times we’ve tried the cash method we seem to spend more! I know, it goes against everything everyone says but that’s what we found.

    BUT as I said at the beginning, I think we are NOT the norm. Most people struggle to not overspend and so I still think cash is typically the smartest option for most people. We have a good friend who is an admitted spender. If she has a credit card on her, she will use it without much thought for whatever she wants even if she doesn’t have the actual money for it. She has learned that in order to live smart financially and to get out of debt she MUST not have any credit cards and MUST use only cash. I applaud her for choosing that and she is seeing the benefits!

    • Tshanina Peterson
      Tshanina Peterson01-14-2014

      Lydia, I think it’s definitely okay to be in the minority! I’m glad you’ve found a system that works for your family!

      Thanks for stopping by and joining the conversation!

    • Jordan Elizabeth
      Jordan Elizabeth02-05-2014

      My parents have taught me well growing up to spend sparingly.

      I’m going to join the minority here :) I noticed the same thing as Lydia – I’m more likely to spend my cash. Not sure why…I think maybe because I keep track of my “plastic spending”, so it’s an extra step to record a purchase. Whereas cash is there or it isn’t.

      Last month I was on a trip and had both cash and plastic. First off, I got sick of paying restaurant prices (after just two meals), which I paid for using plastic. I stopped at the grocery to pick up food for a couple days and paid with cash. Later I spent some more cash on a gift. When I used credit I “felt it” more for some reason. Cash I handed over more easily. (Although this particular example probably also has to do with the types of purchases – a frugal food choice and a gift.)

      In any case, an off-topic takeaway is this: train up a child in the way she should spend and when she is older, she will not depart from it :)

      • Tshanina Peterson
        Tshanina Peterson02-06-2014

        Thanks for sharing Jordan! It sounds like you have very wise parents – I’m glad they trained you well!

        I agree with you, eating out can get expensive!

  3. Megan

    My husband runs a fledgling small business that is 75% cash intake that fluctuates from week to week. Our income is under $45K for a family of 5. We do have a debit card but we only use that for gasoline purchases and the occasional online purchase. Most of our bills are paid via online bill pay and our mortgage is paid via cash. All day to day purchases are also made with cash, if we don’t have the cash, we don’t make the purchase. We have many neighbors who vacation every year putting it all on their credit cards. We have never been able to take a vacation since we have no plastic. I received an inheritance from my brother’s passing last year and we were able to take our first family vacation. I could not fathom putting $4,000+ on a credit card and trying to pay it off. I am given X amount of dollars a week to grocery shop with and I make it work. Some weeks I get more cash than others to shop with. I do not coupon as most coupons aren’t for necessary items. My family eats, is clothed and is happy. This past Christmas many friends were posting photos of their Christmas trees on the eve of the big day with loads of gifts around it. We had a modest amount. Shopping for Christmas presents is most definitely more thoughtful when you only have an allotted amount to spend. We do not budget per se, but are limited with what we can spend weekly. I would be fearful of our spending if we had a credit card to “fall back on”.

    • Tshanina Peterson
      Tshanina Peterson01-14-2014

      I’m totally with you on this Megan – “I could not fathom putting $4,000+ on a credit card and trying to pay it off.”

      Growing up my family had a modest Christmas budget too. Not having a ton of gifts under the tree definitely made us appreciate the gifts we did get and I’m thankful for how things were! :o)

      Thanks for stopping by and sharing!

  4. Dani Grant
    Dani Grant01-16-2014

    I try to always buy our groceries with cash. When I don’t I end up spending more than our budget and having to make up for it or go without something else. I don’t find it hard to pay with cash, but I definitely shop smarter and keep a running tab so I make sure to stay on budget!

    • Tshanina

      It’s so very easy to overspend at the grocery store isn’t it Dani? Thanks for stopping by and sharing!

  5. Ann Malone
    Ann Malone01-20-2014

    I hate to admit it but I do spend money differently when I’m faced with cash. I dislike giving up my hard earned money; its abit painful to hand over cash. I use coupons more when I’m paying with cash. I question want vs need when I’m holding the almighty dollar. My debit card feels different… there is less emotional attachment to that piece of plastic. Why is that I wonder? That is something worth pondering. Thank you for the wake up call.

    • Tshanina Peterson
      Tshanina Peterson01-20-2014

      “My debit card feels different” – so true Ann! Thanks for sharing!

  6. Mary V
    Mary V01-31-2014

    I am very careful about my spending, and have thankfully spent my whole adult life (20 years) out of debt, except for a mortgage. I went to a cash envelope system (Dave Ramsey) when money got tight a few years back. EVERY TIME I used my debit card (we don’t use credit cards) I went over budget. It only took me a few paychecks before I stopped doing that. It’s not necessarily that the card feels different. I think it’s simply that when I use the envelopes and put in the max amount I can spend, I can see how much money is left every time I spend money. On rare occasions I borrow from another account, but not usually. We have learned to live without a lot, and to wait for what we want, even when it’s somewhat painful.

    • Tshanina Peterson
      Tshanina Peterson02-01-2014

      High five to you for staying out of debt Mary! I’ve had to “rob Peter to pay Paul” with my accounts too…glad to hear that I’m not the only one who does this.

      Thanks for sharing your story!

  7. Laura

    My husband and I have been cash only for 4 years now. We do pay with gas using the debit card, because getting change back was a hassle. The first few months were a definite learning curve. We would have many, many meetings to discuss how we had spent our money. At first, I was not a fan. Now, however, I find cash only to be quite liberating. I never have to worry about having enough money. I can tell if we have frozen pizza budget or steak budget. I use a coupon organizer to keep our family on-the-go cash. The sections are Grocery, Eating Out, Medical, Clothing, and Mad Money. My husband and I each have mad money that we use however we wish. Sometimes I bank mine for a bigger purchase, but there is never any guilt. Also, our kids are growing like weeds, so I seem to always need to use the clothing budget. Our stay at home envelopes are as follows: home repairs, car repairs, Boy Scouts, gifts. This has really helped us become more disciplined in our spending. We have built up some savings and paid off a tremendous amount of debt. We now are working on our college loans (can’t wait to kick Sally Mae out of our house) and our mortgage. We will get those paid off quickly I’m sure. Look for Financial Peace University near you to learn more.

    • Tshanina Peterson
      Tshanina Peterson02-06-2014

      Hi Laura! I, too, am a big fan of Dave Ramsey!

      It sounds like your family has found a fabulous system, and I have no doubt that you’ll be out of debt soon! Keep at it!

      Thanks for stopping by and joining the conversation!

  8. Carey

    My husband and I do use credit cards to receive cash back monthly but in 30 years of marriage have never carried a balance or had any debt. We have never had a car payment or mortgage. While we don’t have a formal budget, our philosophy is “if we don’t need it and/or we can’t afford it, we don’t buy it.” My 3 children are college age now and they all began working part time jobs before high school and were expected to pay for all of their “wants” ( entertainment, school dances, fun clothing purchases)They always paid for their own texting costs and data phone charges if they wanted those luxuries as well as put gas in the car they borrowed. While we are lucky enough to be able to afford these things, we believe this helped teach our kids to make better financial choices and appreciate the things they have. We have tried to live by the “millionaire next door philosophy” also. My husband owns a small consulting firm but brown bags his lunch everyday. He has a 6 yr. old cell phone and drives a 21 yr. old car with almost 300,000 miles on it! (My car is 14 yrs old). We live in an area of affluent families who drive luxury cars, take amazing vacations and wear designer clothing. My family is well dressed and fed and my kids are attending college debt free. I shop, however at resale boutiques, garage sales, craigslist, and buy retail only on sale, use coupons, price match for groceries (and don’t buy non-necessity food items that are not on sale.) Our lifestyle is a result of choices. I was fortunate to be a stay-at-home mom for 16 years! During this time, I was always able to supplement our income by teaching classes in my home, doing in home daycare, doing design work, etc. We have been blessed with the ability to have taken several nice family vacations because we have saved in other areas (not eating out, skipping purchases like expensive school portraits, buying sport equipment 2nd hand for our kids, reselling used items we have outgrown on craigslist, etc.) We rarely had a paid sitter while our children were small, but rather enjoyed a night out when we traded with friends or family. In an areas where most neighbors use lawn services and cleaning ladies, we cut our own grass and take care of housekeeping chores. I taught for 10 years before staying home and realized how many times the school atmosphere and fund- raising activities “pressured” children and families financially. My children bought books at garage sales and still use our public library instead of pricey school book fairs or monthly classroom orders. We also still use our library for books, DVDs, free programs. My kids brought their lunch to school everyday instead of buying overpriced unhealthy cafeteria food. I don’t think they ever felt deprived! I went to work part time as a substitute teacher when my youngest was 16 and am lucky to have work hours and flexibility that still allowed me to be home when my were. I only make about $12 an hour teaching, and when I see something I’d like to purchase but don’t need- I still think about how many hours I have to work to pay for the item and I have tried to convey that message to my kids. Over the years I’ve tried to model a realistic ‘think aloud’ example when shopping. I truly believe that many of us can change our spending habits and teach our children by example when we remember it is about making smart choices! Our most important choice as a family was to live debt free.

    • Tshanina Peterson
      Tshanina Peterson04-15-2014

      Carey, it sounds like you and your family have a wonderful financial system down that works for you. Your children are blessed to have parents that lead by example and teach them how to spend their money wisely!

      Thanks for stopping by and joining the conversation!

  9. Jill

    I use cash for groceries and gas. It’s made a HUGE difference in our spending. It stinks walking around in the grocery store with a list, a calculator, a coupon binder, and having to write down every penny we’re spending along the way, but it has made a HUGE difference in how we spend on groceries.

    When I set a budget before I would almost ALWAYS go over budget, or my husband would stick things he saw in the cart. Now, I’ve NEVER gone over my grocery budget.

    It’s also very freeing to KNOW you have grocery and gas money in your pocket. It lets me know that if WE NEED TO we can get our bank account down to a really low amount and still have food/gas money. We’re not just sitting around guessing, we know what there!

    • Tshanina Peterson
      Tshanina Peterson04-15-2014

      Jill, I agree that writing down every cost and calculating at the grocery store isn’t fun, but it’s well worth it.

      That freeing feeling is definitely worth all of the hard work though!

      Thanks for stopping by and joining the conversation!

  10. Kim @ Homesteader's Heart
    Kim @ Homesteader's Heart06-27-2014

    We pay most everything with cash. We use the envelope method of budgeting and it really helps you not over spend. We write checks for big bills like electric, insurance etc. But grocery shopping, gas, misc. is all cash. I don’t even carry a credit card with me. It stays home for emergencies. *smile* It takes some getting used to but once you get it down you want go back to plastic.

    • Tshanina Peterson
      Tshanina Peterson06-28-2014

      Paying with cash definitely makes you think twice about your purchases, but it’s definitely worth it!

      Thanks for stopping by and joining the conversation Kim!

  11. Kelly T
    Kelly T09-05-2014

    I quit using a credit card for everyday purchases 5 years ago. I would agree that I am spend money differently. I don’t miss all the extra stuff I used to randomly just pick up as I shopped. That doesn’t mean We are depriving our family of things we really want. Just that I don’t spend on things for which we haven’t planned or budgeted.

    • Tshanina Peterson
      Tshanina Peterson09-08-2014

      After purchasing all of the “extra stuff” I’m sure you were asking yourself why you bought it in the first place – or at least that’s what I’ve done with impulse buys!

      Thanks for stopping by, Kelly!

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