Does paying with cash control spending? After unpacking the pros and cons, decide if it would work for you.
The Pros
1. Improved spending awareness
Paying with cash keeps you aware of how much you have as you shop, and you become keenly aware of how much things cost. Shoppers using cash know they can’t go over their budget because once the money they have is gone, it’s gone. The question that arises is simple: should you buy a nonessential item that you don’t have enough cash for? The choice is clear. Either you decide to put an essential item back and reallocate your cash funds for an impulse purchase that you really don’t need, or you do without.
Spending decisions become more clear-cut, and you are more likely to justify keeping your cash for what you need, not what you want. When you spend cash, you feel it more than when you charge it. You are more likely to stick to your budget. If, however, you decide you want to use the cash you have for the item that you don’t have enough money for, you have only yourself to blame when, later on, you realize, after the fact, that it wasn’t worth it. Now you have to do without. Warning: This is often when you give in to the marketing of sale items, especially buy-one-get-one-free (BOGO) offers, for products you wouldn’t have purchased otherwise. If you hadn’t budgeted for it based on the cash you have, it’s wise to avoid these temptations.
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2. Reduce risk of overspending
As referred to in the previous section, paying with cash limits what you can buy if you are adopting a cash-only lifestyle. With cash, you either have it or you don’t. If you go to the store to buy milk and bread and only bring enough cash to pay for those items, you won’t have any money left to spend beyond what you have on hand. The risk of overspending is eliminated as impossible because the cash amount you have doesn’t provide for extras. Cash only means you only have enough. You can count the cash you have and realize there is no negotiation possible to magically change what you physically have to extend it to a greater amount.
3. Avoiding debt
Unlike with credit cards, when you shop cash-only, there’s no racking up of debt like when you buy things with credit. You pay for your purchase right there and right then with the cash you have, not with the expectation of paying it back over time at a later date. If you don’t have the cash, you don’t go into debt buying it. No excuses. No way.
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4. Potential for discounts
Some stores will give cash-only shoppers a discount. This could be a benefit for smaller stores or non-traditional sales at fairs, parks, in parking lots, or be it fresh from the farm on the back of a truck. It’s cheaper for the seller not to have to pay the fee for processing small amounts paid for with credit cards, and they get their money immediately. Given this scenario, they might pass a little of that savings appreciation on to you, the customer, if you’re cash-only. Additionally, they might also be more willing to bargain for a lower price.
5. Financial Discipline
Cash-only builds financial discipline that forces you only to buy what you can afford with the cash that you have. The skills that come with handling cash-only purchases build up over time. With cash, you know where you stand. You recognize that there’s no need to pick up additional items when the cash you have is the maximum limit.
Do it once and pat yourself on the back; do it every time you shop, and it becomes a habit. The discipline created by going cash-only affects your budget’s bottom line, and at the end of the week, the month, the quarter, or the year, you’ll find that you stuck to your budget perhaps better and easier with your cash-only spending. You may even have some money left over because cash-only kept you within a limit that became a real and clear visual: the cash you have, nothing more.
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The Cons
1. Risk of loss or theft
Cash-only means that you have cash on you. There is a danger with carrying around any amount of cash, whether it is a cashed paycheck, it ranges from grocery money to rent money, or is for other bills. You could lose your cash if someone sees you pulling out a roll of bills to pay for something and robs you. Cash-only opens you up to these risks. You could not replace it, report it, freeze it, or use it like a credit or debit card if it becomes lost or stolen. This is the dark side of the cash-only limit. When using cash only, you become a target, and that cash, regardless of the amount, is irreplaceable if something negative occurs to it or to you because of it.
2. Inconvenience
Many businesses won’t take cash-only because of the risk of loss or theft that they could suffer. You are inconvenienced when trying to go cash-only on larger expenses, like when it comes time to pay your monthly bills. You could have to go from place to place, in person, during business hours, or put the money in an envelope and mail it out to companies near and far that provide you with goods or services. Here, inconvenience forces you to take risks that could lead to loss of money through the mail and the real possibility of it never getting to the desired destination.
3. Potential for loss or forgotten receipts
With cash-only, a receipt is your proof that you paid for a purchase. This is equally and especially true for larger bills like rent or utilities, and with smaller ones like gas or groceries. If there is a problem with the quality of something, without a receipt, it is almost impossible to exchange or get a refund. If the cashier tosses the receipt at the bottom of your bag or forgets to give you one, you could lose the advantages of the receipt. No receipt makes it difficult to prove your purchase or payment. Receipts are essential for tracking and confirming expenditures, as well as documenting spending habits. Cash transactions without a receipt are hard to track and difficult to prove. Good intentions alone are not sufficient.
4. Limited resources
Maybe you don’t have enough to go cash-only. With cash-only, since you can only buy what you have money for, this limits you to your actual resources. With emergencies and other unexpected expenses, not having enough is always a possibility. When faced with medical bills, property taxes, or auto repairs, a lack of cash can prevent you from moving forward due to limited financial resources. If you don’t have enough cash saved and set aside for a rainy day, then you can’t have it because you can’t afford it. Without sufficient cash on hand, you face real challenges if you lack credit access during times of urgent need.
5. Security risks
The biggest drawback that keeps many from budgeting by going cash-only is the security risk that threatens to make all of the pros of a cash-only lifestyle outweighed by this con. Having a large amount of cash on hand means that you could run the risk of jeopardizing your safety, as stated earlier. The question is not when, but how. A robber could not only take your money but also harm you. Dealing with a lot of cash puts the person you are paying it to at risk, too.
The world has shifted from a time when cash transactions were the norm to an era where cash feels almost outdated. Today, people prefer the convenience of swiping, inserting, or tapping a card with a chip for all their purchases. Is financial discipline worth the real danger to your personal security? Maybe or maybe not. For smaller purchases, such as gas and groceries, setting a cash-only limit can be an effective budgeting strategy. Paying for larger expenses that are not immediate or that require carrying a significant amount of cash to buy more expensive goods and services locally can be problematic. Therefore, relying solely on cash is not a smart choice.
Carrying a small amount of cash for emergencies is okay; however, debit cards or check cards are better. Just like with cash, you can only spend what you have, and the expense is deducted directly from your bank account. It’s safer. It’s able to handle expenses near and far. You can track it or freeze it if lost or stolen. In sum, it’s convenient with fewer security risks and the same financial limitations. When adopting cash-only as a budget hack for all your expenses, the risks and inconveniences may not be worth it.
