Use Cash and cut down on Overspending!!

Last week I heard a statistic on Komo 4 News that "credit card use has decreased for the 24th straight month.  Amid this economy Americans are using less credit."  This is encouraging to me because with people using less credit that means they're using cash and therefore probably spending less.  They aren't overspending!!

Earlier this summer I listened to John Cummuta's Transforming Debt into Wealth program and I learned several things to increase my financial IQ.  One of the most powerful paradigms I learned was to use Cash in all your transactions.  While this has caused some pains it's helped us to see our financial picture from clear glasses and be in greater control of our finances.

As mentioned earlier, we're going through some growing pains now as we've adopted the cash only policy.  You see, for the past several years we found a "good deal" on a credit card that gave us one point for each dollar we spent.  We could use these points to cash in on airline flights, gifts, etc.  We thought it was okay because we we paid it off at the end of each month and therefore were paying no interest.  We've been able to cash in and get some gifts with our points but they're not nearly worth the extra money because we overspent.  This is the reason why we could never keep money in our savings account.  John Cummuta said you spend an extra 20-30% when you use credit.  Does this sound familiar?  If so...

Here are some things to consider when you make a transition from using credit to using cash for purchases.

• Look at your finances from a bigger picture
  Since you're using credit there's a good chance you are overspending by 20-30% you'll want to check your bank account and check where you are spending your money.  You may need to cut down on some purchases to make your spending fit into your existing salary.
• Make changes appropriately
  Chances are you've been overspending for some time and it may take several months to turn this big ship around.  Implement changes appropriately, including your family or others that may be affected by the decision.  On the other hand, some changes you may be able to make right away, for example, cutting down on the times you go out for dinner each week, or trips to the movies or the mall.
• You may have to make hard decisionsThose affected in the decisions you are making may be used to the credit, overspending lifestyle, i.e. going out to dinner or to the movies a little more often, buying an extra article of clothing here and there, etc.  You may have to say No now when before you may have said yes.  It may sting now but seeing the big picture and getting your finances back on track will provide you with a peace of mind that you may not have felt in a long time.
• Keep track of your finances
  Finally, you'll want to keep good track of where your money is going either by using Online Banking or by keeping your checkbook up to date by writing down all your purchases.  You are used to spending more so you may not be used to keeping as good tabs on your finances.  Get some money in your bank account to minimize any bounced checks or other overdrafts you may incur.
  
  Jody has found it easy to keep track of cash by using a check register and writing down all of her purchases.  A caution to using cash is that it "flies out of your pocket" easier and faster so you have to keep effective records.

I hope this helps you in your quest for financial control and eventual freedom.