The following is a guest post by a dear friend Ed(@ed_bruner) who is just months away from finally getting out from under $40,000+ in debt.
Use cash to plug up the holes
I assume every family budget has holes in it. Ours did. The holes were mostly unaccounted spending or personal spending…a trip to a retail store, a lunch out, snacks, etc. These “little”spending events can destroy a budget or even derail your debt reduction if they are not kept in check.
The way we handle this issue is by allowing ourselves weekly spending cash. The rest of the income is for bills & savings. All significant purchases are planned and discussed. Once the personal cash is gone, the spending stops. With the change to cash I’ve found that I pay more attention to the cost of things I’m buying. If I want to buy something, then I need to save for it. It really is as simple as it sounds and it works.
I’m sure you are familiar with the statistics regarding credit cards specifically that we are likely to spend up to 15% more when shopping with plastic. Dave Ramsey says that a McDonald’s study showed a 47% increase with plastic. Cash is finite, credit (and debit) have overdrafts and outrageous credit limits, which entice you to be less concerned about price. The minimum payment is only a small fraction of the debt amount.
We do use debit cards but have stopped all spending on credit. When we use debit, it is subtracted from weekly cash allowance.
Its much more enjoyable to manage money, than manage debt.