Some people find that cold hard cash in their pocket is an invitation to spend. Others feel that carrying cash makes them spend less.
Some people spend exclusively by cash. Some would prefer never to have cash.
I started thinking about it and wondering where I fit in.
I used to spend pretty much exclusively in cash for most everyday purchases except for groceries and laundry, where I think I've pretty much always used a credit card.. When I'd go out to eat, I'd pay in cash. When I went out with friends, it was cash. Things like the dry cleaners, haircuts, clothes were all done with cash.
When rewards credit cards came into play, I moved more and more of my spending to credit.
It was only when my wife and I combined our accounts that I converted nearly all of my cash spending to the use of the debit card. Since then, I can take out ten bucks and it will often last a month or more.
I find that when it comes to whether I spend more or less with cash, I think that I actually spend more. With me, it all boils down to percentages. Meaning, that the less I have in my wallet, the greater percentage of cash that each purchase will make.
Say I have $100 in my wallet. If I pass by the vending machine and decide that a $1 soda looks good, I can think to myself ‘That only represents 1% of my total cash, so why not?'. In relative terms, the purchase represents 1% of what I have, which, to most is ‘no big deal'.
If I only have $5 in my wallet, suddenly that $1 soda represents 20% of what I'm carrying around. For me, that will turn a potential purchase into an empty-handed walk away from the soda machine.
Meaning for me, the less cash I carry, the less overall spending that I do.
I think people are wired differently. Some people see the use of a debit card as a black hole and so they prefer not to use it. Personally, I track our debit card spending almost daily and we have a pretty strict monthly spending limit, so each purchase definitely makes me consider whether I really want to spend money on it knowing that there might be other uses for those dollars.
I think the trick, no matter what, is to create spending limits, track them, adhere to them, and modify them if necessary. You need to modify them if you're finding yourself short on essential things like food, gas, or other important things. Allowing yourself more so that you can buy a new pair of shoes every other week probably violates the spirit of spending limits. The key is to set realistic spending goals, and also to track your purchases.
Either way, I think every person should understand their ‘cash' preference and how it affects their spending. With so many options available for many people, it only makes sense to make the adjustments that will reduce your discretionary spending.