Time to clean house. I have been carrying this dirty laundry around, since August. In July I started an all cash experiment to test the Dave Ramsey argument that you can save 12-18% just by spending cash. View the cash only experiment details here and the benefits of spending cash here. Some readers have asked me for the results of the experiment while back, but I admit I have none to offer. It took a few months, but I am finally willing to admit that the experiment was a failure. I apologize. We didn’t fail to complete the actual experiment. [...]
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Last post we talked about changing the way we talk about car loan debt, now let’s talk about avoiding the debt in the first place. The picture to the right is the car we own today. Ok, ours is just a normal bronze Murano, but you get the picture. In this post I wanted to outline the strategy we followed after going $15,000 for a 1999 black on black Toyota Celica. First off, I didn’t realize it until years later, but buying the Celica was a mistake. My wife liked the car so much that she may disagree, but going [...]
Read More10 days into the July Cash Experiment and we have seen our share of speed bumps. First was forgetting that Sunday the 1st was actually July. I hadn’t withdrawn any cash to start the month. My preparation wasn’t there and I resorted to the debit card to avoid a 2.00 ATM fee at Target. Probably not the best choice for the experiment’s sake, since dealing with fees is something that must be balanced when using cash. The next speed bump was with paying tolls. I have EZ-Pass, an electronic toll collection system, so I haven’t paid cash in years. The [...]
Read MoreDuncan Simester created one of the first experiments that attempted to directly test how consumer’s ‘willingness to pay’ is affected by credit cards. In this experiment 1st year MBA students were instructed to provide a sealed envelope with the amount that they would be willing to pay for sold out Celtics and Red Sox tickets. One set of instructions required cash payment and the other a credit card payment. In both cases the face value of the tickets were not given. The prize was to be sold to the person who wrote down the highest price, but sold at the [...]
Read MoreIn honor of the upcoming cash spending experiment I wanted address the benefits and drawbacks of spending cash. I will revisit this list after the cash experiment to see if I have anything to add or critique. Benefits of Spending Cash First and foremost, spending cash makes it impossible to spend more than you have. Going into debt is impossible with cash. Forces us to face the consequences of a purchase up front rather then delaying it until after it is too late. Thinking through the consequences of a purchase may change your decision. By consequences, I am talking about [...]
Read MoreWith June drawing to a close, I wanted to lay out the plan for the cash only spending experiment in July. I talked about the impetus for the experiment in the ditch the credit card and save post. Using the scientific method here is the break down of the experiment : Goal : Test whether spending only cash will save 12-18% as Dave Ramsey suggests. Hypothesis : Spending only cash will reduce the amount of money consumed in a given month. Control : Currently the plan is to compare the cash only spending to the average of the previous 2 [...]
Read MoreI admit it, we do 95% of our spending on plastic. We have been using our debit and credit cards for years to pay for just about everything. The discipline is there, so everything is paid in full at the end of the month. $20-$40 cash lasts me the whole month. The system works for us, because we have discipline and are not big spenders. Also, downloading the transactions to Microsoft Money is a quick and convenient way to track your spending. With that in mind, I remembered Dave Ramsey saying that you spend 12-18% less when using cash. Spending [...]
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