Paying with Cash…Does it Save Money?

by Debt Destroyer on August 30, 2008

The other day when I was prepping for a fantasy football draft, I stumbled upon a video at Yahoo that covered a family who spent only cash for one month. According to the story they saved $1800 (24%) compared to what they normally spent. After I picked my jaw off the floor from being amazed that they could spend almost 8 grand a month, I started thinking maybe I should get in on the savings.

Some of you will remember that I’ve recently been introduced to Dave Ramsey and his method of debt elimination set out in his book, Total Money Makeover. There he proposes that you will save big money by paying all cash (12-18%). It makes sense. I mean we all do our best Bill Clinton and “feel the pain” of handing over cash rather than the ease of just swiping a card.

But do you really save that much?

I guess there is only one way to find out. Starting in September, I’ll stat paying cash. But here’s the thing, I’m not going to go all cash.

I know I won’t reap the full benefits of spending only cash, and that is fine by me. Here’s where we spent money in July. I don’t see how spending cash for some of these items would’ve saved me any money.

I’m going cash only for groceries, department store items, entertainment (eating out), and other household misc items. These are the parts of my budget where I’d love to see some savings. Even if it ends up only being 5%, it’ll be worth it.

I see that The Happy Rock has gone down the cash only road himself. From the way it sounds it didn’t work out the way he planned. I can totally see that happening in an experiment type setting. And from reading the comments on THR’s post, it sounds like a lot of people have had mixed reactions when trying something similar.   The Happy Rock has also talked about the credit card premium and the benefits of spending cash.

That’s another reason I’m trying a hybrid of the cash only method. Instead of setting ourselves up for failure by going cash only for everything, I want to start small and if we see tangible results. If we do, maybe then we’ll expand this way of spending to other areas of our budget.

I’ll only have two months of spending habits to compare this new way to (July & August), but it’ll have to do. I’m really hoping that we can shave off around $100 a month by doing this.

In our house that extra $1200 a year will come in mighty handy.

As always I’d love to hear what your thoughts are. I bet a lot of you are already on the “cash” train, if so, how is it working for you? And on the flip-side, I’m also willing to bet that a lot of you have already tried something like this for yourselves. Did it stick, or did you decide it wasn’t for you?

Until next time,