Cash Part 2

At times I feel like a three-headed alien when I admit that using "plastic" to spend, doesn't feel like "real" money. It's magic. (Somehow, money in my checking account "magically" disappears when I use plastic.)

As the economy has slowed, and Wendell's paycheck's shrunk with it, I knew I had to get real about our money really fast. So I sat down and figured out our bills on a paycheck by paycheck basis, then cashed out what was left. Last pay period that was $418. I was shocked.

With just over $400, I would have to buy enough groceries for then next 17 days, buy back to school clothes and pay for PTA memberships, yearbooks, etc. But I did it. I was so proud.

Next pay period will be better, I told myself. I'll have lots of money. $1100, probably. I mean, not exactly but after I deduct a few things it should still be $700 to $800. Yea. That'll be great. It was pretty fuzzy math, interestingly enough it's the kind of math our brain prefers, but a good estimate, I was sure.

Wanna guess how much disposable income I have this pay period? $231. No kidding. It's 51% of what I had the first half of the month and 33% of what I thought I'd have, going by my lowest estimate. Thankfully, this money only has to last us 13 days, but I feel a bit stupid being off by that much. It was like I was compelled to estimate in my favor leaving an enormous gap between where I thought I'd be and reality.

An MP Dunley article, Is Debt Your Destiny, talks about some of the things I've noticed as I've retired the debit card and started paying with cash.

"Numerous studies have demonstrated that when a purchase and the payment for it are closely linked -- as when you spend cash -- you are more aware of how much you spend and tend to spend less, says Dilip Soman, an economist and professor of marketing at the University of Toronto.

Uncouple the purchase from the payment -- as when you whip out a card or tap that home-equity line of credit -- and you suddenly become much fuzzier about how much you spend. In those situations, you tend to spend more, Soman says."

This has been shockingly true for me. When I'm spending cash I can't go over budget, not even by a little bit, otherwise I'll be standing at the register saying, "Now, if I take that off, then how much is it?" I wouldn't allow myself that level of mortification. So when I shop with cash, I take my grocery list and a pencil and jot down what I'm spending as I go.

In this case, I over estimate every item rounding up to the nearest dollar. That way when I get to the register I know, pretty darn close, what the total will be. The two times I've done this I've been within $2 of my estimate.

Probably the biggest surprise has been my sudden avoidance of "extras." If I don't have the cash for it, it doesn't go in the cart. Not that I was some kind of spendthrift before, but $5 here and $1.50 there and $3 for that, all seem like insignificant things, but collectively, they sure add up.

I rarely get out of Wal-Mart spending less than $150. My last visit: $88. At Costco I have the same problem, but my visit there on Monday: $96. Switching to cash has put me in touch with our budget in a wonderful way. When I made this change, I mentally prepared for deprivation eating: beans, rice, eggs. (I even watched 30 Days with Morgan Spurlock about living on minimum wage, which both gave me ideas on how to reel in spending and made me feel very rich indeed.)

But we haven't even been close to deprivation. We're having all of our normal family meals with a bit more care given to the planning and use of left overs. In reality, switching to cash hasn't really been hard at all!