• Anne

The Power of Cash

Do you know the power of cash?

If you know Dave Ramsey, you’ll know that he is a big advocate of a cash budget. Why do you suppose that is?

It’s hard to break up with Benjamin Franklin

I want you to look deeply into the eyes of Benjamin Franklin and tell him you are letting him go. It hurts, doesn’t it? Even giving up Andrew Jackson is hard to do, because you know you won’t get him back.

On the flip side, look at your card. It’s more like a boomerang, because it always comes back to you. I’ve never had to bid my credit card farewell; it's always returned to me, but my green bills never came home. As such, there is more pain associated with spending cash than using plastic, because you actually see your money leave you.

I feel like if the stores showed your bank account decreasing every time you spent money, that would give you some emotional pain, but since your actual money is so separated from what you’re doing, most people hardly notice how much they are spending.

There is almost no friction when you use plastic. The harder something is for you, the less likely you are to do it. That’s why people started taking cards. It’s slightly more expensive for the companies, but they know it’ll be well worth it since you are almost guaranteed to spend more money.

We don’t worry as much about how much we are spending if we have a card; we know we can cover it. On the other hand, when we have cash, we have to be very careful about what we’re doing so we can afford whatever we need to pay for. If I only have a $20 bill, I'm going to be more mindful of what I order at a restaurant.

What I do

I don’t have an all cash budget, just because I don’t like going to the bank, but most of Ross’s and my spending money, as well as our date fund is in cash. As such, it’s hard to go over budget when you’re spending cash. You still have to resist the urge to reach for your card when you want something slightly more expensive than the change in your pocket, but if you can do that, you will never go over budget!

Ross and I have had good experiences with this for several reasons. Firstly, it’s nice we don't have to keep track of transactions that aren’t that important. If it’s cash, we consider it spent and we know how much we can spend by how much is left in that box/envelope. Secondly, we’re more careful about how much something costs before we go. We save up more for fancy dates and we are more mindful of how much we are spending, rather than just regretting it later.

Switching those budgets to cash has been incredibly helpful and has helped us stick closer to our budget and better define what we should and shouldn't do with money.


I advise that you should switch at least one budget to cash. If you want to spend $20 per week on eating out or coffee, you can withdraw that cash at your grocery trip every week and use that for spending money. You might find it a bit frustrating at first when you can’t buy some of the things you want, but you might find you’re planning things out better and that you’re sticking to your budget better.

I’d also like you to watch this video, by Dave Ramsey, about the power of cash. He makes some very good points about cash and behavior.


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