Many nations are becoming cashless societies, thanks to the advancement of financial technology. In these nations, people just bring a credit card or pay through digital wallets, such as Venmo, Cash App, Google Pay, and so on.
Switching to cashless does have benefits. For one, an individual may feel safer if they don’t carry a stash of cash outside. If their wallet with their credit cards is stolen, they can immediately call their bank to deactivate and block the card so that they won’t get robbed of money. It’s also convenient to pay someone or send money with just a few clicks on your smartphone.
Also, there is evidence that COVID-19 can remain in banknotes. Thus, cash can be a cause of the virus’s transmission.
But with credit cards and digital payments, there is the risk of overspending. Those who lack self-control are at risk of this problem. And it can lead to other more serious financial problems. In the time of a pandemic, people need to be as careful as they can with their finances. Financial security leads to financial freedom, which then alleviates other money-related problems and can make you feel less stressed.
One of the best solutions you can take to manage your finances better and eventually reach financial freedom is by doing a cash-only diet. Here’s why:
Paying using actual banknotes can help you practice mindful spending. And this will lead you to buy less in the long run.
When you hand out cash to pay for goods, you may experience the pain of paying. This feeling can encourage you to spend less because you don’t want to keep handing out the money you have and be left with none.
The pain of paying isn’t as prominent when you pay for goods using credit cards because of the amount of time between receiving the goods and paying for the bill. Let’s say you bought something out of impulse at the mall and used your credit card to pay. You won’t experience the pain of paying until you have to pay for your credit card bills. By that time, you realize you actually don’t need that item, but you can’t return it anymore. This can become a cycle if you don’t address it immediately.
By paying using cash only, you’ll be more likely to evaluate the items you want and determine if it’s really worth giving your money away or not.
Attachment to Purchases
A 2016 study found that people who pay using painful forms of payment, particularly cash, become more attached to their purchases and disinterested in the alternatives they didn’t choose. So based on this study, if you pay for goods using cash, you will cherish them more.
This attachment can become a great way to avoid overspending and live a more financially secure life. For instance, since you won’t care about alternatives and focus on what you have, you won’t be tempted to buy something similar.
This satisfaction can also transcend to intangible goods. For instance, you have leaky pipes and have to hire someone to fix them. By paying the plumbing expert in cash, you’ll better appreciate their work and think that what you’re paying for is truly worth it.
Paying for goods with a piece of plastic doesn’t provide any pain since you don’t see your money decrease. There’s also a certain appeal to swiping a piece of plastic and then getting whatever you want. And this appeal of a credit card can make you prone to overspending, as mentioned earlier.
That said, a cash-only diet will help you decrease and eventually eradicate your credit card debt. By paying for goods using cash only, you can see and easily calculate how much you are spending every day.
Easier Expense Tracking
A cash-only system will also allow you to track your expenses more easily. For example, when you withdraw from an ATM, you know exactly how much you’re pulling from your account and how much is left. You can easily record your spending in a notebook or an Excel spreadsheet using physical transaction receipts.
Expense tracking is an effective way to manage your money since you can check exactly how much you’ve spent and how much you still have left.
The road to financial freedom can be difficult when you need to make drastic changes in your lifestyle. A drastic change like using cash only will have its challenges. But if it can help you achieve your financial goals, the hard work will be worth it.