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Today, we are diving into the third tool you can use to stop cash from bleeding out of your bank accounts. Life is expensive on its own. Adding overspending or impulsive spending can absolutely ruin our chances of saving and investing in the life we want to live.
If you’ve identified your areas of overspending, you’ve heard me give you two tools to help curb those. 1 - the 24 hour pause and; 2 - the buddy system.
Today, we are going to take it old school if those first two tools aren’t curbing your over and impulsive spending.
If you’ve ever taken Dave Ramsey’s course, you know that he says cash is king. He encourages everyone to use cash for everything, putting cash in envelopes and spending out of those envelopes. The principle of cash is sound, but in many cases, it isn’t practical.
Cash does bring reality to bear. When you get a $20 bill out of your wallet and hand it to the cashier, you can actually feel that money leaving you. When you tap to pay with your phone or buy something with one click on Amazon, it’s certainly convenient, but you don’t feel a thing. This is something credit card companies count on.
And so, cash is a definite solution for stopping the bleeding in one or two categories of your budget. If we felt that every area of your budget was bleeding, then we’d recommend that you use cash for everything. However, I have a feeling that your gas budget is probably not the problem category. Gas really isn’t an impulse buy that cash is going to help slow down. But there are certain areas of your budget where cash could be extremely helpful.
I once sat down with a couple who was struggling to make ends meet. They had a problem at a local grocery store. Upon further investigation, it wasn’t their milk and eggs that were causing them to bleed cash. It was the impulse “additional purchases” that hid themselves in the “grocery” category.
This grocery store was right around the corner from their house and the ease of swinging in there to get a quick snack or drink was far too convenient. Adding an additional throw pillow or piece of home decor might have seemed harmless in the moment, but it consistently brought their “grocery” budget in at nearly twice of what they had planned.
When they realized there was only really one part of their budget that was out of control, I recommended that they stop the bleeding with cash.
They were on board and committed to using cash for this area of their budget. The last time I checked in with them, they were in a much better financial position and didn’t feel like they were drowning in their finances anymore.
It’s amazing what happens when we stop the bleeding. And when we stop the bleeding with cash, that category of overspending will very quickly correct itself.
Zach Santmier is the owner of Trumble Agency, Inc. and the author of the personal financial course, Increase. He focuses on helping families escape paycheck to paycheck living so they can freely pursue their ideal future.
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