The day my wife Andrea and I started using cash is the day we got a raise. Cash is underused in our hyper-consumer society, and it gets a bad rap. But it shouldn’t. Let’s debunk a few of the cash myths that are out there.
Myth #1: If I have cash, I will spend more.
Carnegie Mellon University did a study that actually showed the pain receptors in the brain are activated when using cash. When you use plastic, those same pain receptors aren’t firing. (That’s one of a few studies on why people tend to spend more when using cards than cash.)
Don’t believe this is true? Ask yourself this: What feels different—paying at the gas pump with your credit/debit card or walking in and slappin’ down a Benjamin on pump #7? Cash causes you to feel pain.
Myth #2: If I have cash, I will get robbed, mugged, beaten, attacked, and then jumped.
They don’t know you have cash in there! Why? Because no one is using cash anymore! A thief has no idea you are using cash because they can’t see inside your purse. You could have $1 or $5,000 inside—it still looks the same from the outside. I paid cash for my [car] and was walking around with $8,000 in cash, and no one cared because no one knew.
Myth #3: I will get a better deal using my credit card because of the sign-up offer.
You can also get a deal using cash. Whenever we are at a department store and we get to the cash register, we are offered a credit card to save 10%. My bill at Target was $31.57, and I could have saved a whopping $3.15. Whoo-hoo! However, I think Target also saw the study from Carnegie Mellon University, and they know “I’ll be bock.”
Cash also offers a discount because of the reverse effect of those same pain receptors. They cause excitement. We went to buy our living room furniture at one of those mega furniture stores you see on television. We actually had the nerve to pull out $2,000 cash money, and fan our face with it while asking for a better deal. We helped them knock off $300 from the total price using cash!
Myth #4: Cash is for drug dealers and I don’t want people to think I am the next Pablo Escobar.
You can still use cash and avoid selling drugs. This is ludicrous, and I hear it often. Cash is not the gateway drug into the sale and trafficking of drugs. I didn’t even want to include this myth, but I have heard it way too often. Moving on.
Myth #5: If I have cash, I will lose it.
Why? If you have cash, you won’t lose it because you will actually feel it in your wallet. Remember those pain receptors in the brain? Do you think they are going to let you lose that precious cash? No way! Just because something is of value doesn’t mean you are going to lose it. How often do you lose your $20,000 car? Do you often misplace your $6,000 wedding ring? What about your $600 iPhone?
Myth #6: Cash is slowly being phased out, and everything will soon be going to credit/debit cards, bitcoin, Apple Pay and the next greatest technology to help you NOT feel money.
Cash isn’t going anywhere.
But let’s just think about how would happen. Are we going to wake up one day and just tell everyone cash is no longer going to be accepted? What are we going to do with all the cash out there in society? Just consider it obsolete and move on? People will eventually get over their cash becoming worthless. Sure.
Myth #7: Cash is too restrictive. If I only have so much cash in my wallet and the bill comes out to be more than I have, I would rather have my credit card on me.
That’s the point! However, you are looking at it from the wrong direction. Try this: “I don’t have the money to pay the bill, so I need my credit card (so I can slowly go into debt).” This plan would be the opposite of awesome.
When we decided to start changing our lives with money, we stopped believing many of these myths and went to cash. It started out as a little experiment to see if we would notice an improvement with our finances using only cash. We never went back because the results were huge. We tell everyone the biggest raise we have ever received was the day we got on a budget and started using cash.
What to Do and How to Do it
On the 1st and the 15th of each month, we go to our credit union and pull out the cash we need for those two weeks. We know how much cash we need because we did our budget before the month began.
We take our cash home and stuff it into our envelopes. We go to the store and use the cash out of our envelopes. When the envelopes don’t have any more money in them, we are done spending.
We estimate we started saving about $500 per month when we went to cash back in February 2011—which means we’ve saved more than $27,000. Wow, that is crazy to see that number staring back at me on the screen. At this pace, we will have saved $60,000 in 10 years.
This post originally appeared on Money Peach.