Modern technology makes it very easy to spend. Have you ever decided to use a new site or app to order food or buy a product? Is it just me or are you overjoyed when you see the PayPal or Apple Pay logo pop up on the checkout page?
It means I will not have to spend the next five minutes entering addresses and payment information to a site that may or may not have robust security protocols. Instead of five minutes, it’s 30 seconds and done. While this may have saved me time during my holiday shopping or having to wait in the lobby of my favorite coffee shop, it takes away something that may have helped me save money in the past.
The cost of convenience
According to the 2021 study Neural mechanisms of credit card spending | Scientific Reports
“…credit cards may instead weaken brakes on spending by lessening the pain associated with making payments.
With credit card purchases, the act of payment is temporally removed from the act of acquisition…This dissociation of purchasing from payment may put costs out of mind and reduce the influence of price on product purchase decisions.”
I am not surprised by the findings of this study. Imagine coupling the ease of credit cards with the convenience of our mobile devices. Tap to pay has saved me a couple of times when I forgot my wallet, but how much has it cost me in cases when I intended to spend nothing?
Years ago, when I wanted to take a dramatic step in budgeting, I stopped using credit and debit cards and paid cash for everything using the old envelope method of budgeting. While it was more cumbersome, I never had a better grasp on my spending and when I pulled the dollars from my envelope, I would feel a nudge of pain as I depleted my budgeted funds. I had to consider if I was making a wise purchase and planned well enough to last the remainder of the week with the cash in my pocket.
A new year can serve as a point of clarity for physical, mental, and financial goals. As this blog post is set to be published close to the beginning of 2025, let me challenge you to unplug, even temporarily, from plastic and digital spending to reacquaint yourself with the needed pain of spending cash. Many people have practices of abstaining from certain things like food, TV or even social media to start the year. A digital spending cleanse can serve several purposes:
1) It can cause you to become more mindful. We all want to organize our spending better, but this spending cleanse can be a great catalyst. By living on a cash basis for a few weeks, you will be able to determine what things are truly necessary to spend money on.
2) It also makes your shopping more efficient. Managing cash for transactions can help nudge you into fewer trips to the store. It may also prevent you from subsisting with delivery from places like Instacart and DoorDash. In a bind, you may want to substitute your recipes with ingredients already in your pantry.
3) It can help you clear up any unnecessary automatic payments. If you are auto-paying bills, I would not suggest stopping that, but this is a good time to peruse your online banking for any automatic debits that are unnecessary. I recently updated my phone, and I have been flooded with “3-month free” offers for services I won’t need. This is a way to trap consumers into paying for the subscriptions later. If you have subscriptions you want to keep, consider canceling them or asking to cancel to receive a discount.
Convenience is not inherently bad
We all live very busy lives and having the tools of credit cards and digital payments methods can save a lot of time and trips to the bank. While it may make sense to take a temporary break to shock your positive budgeting habits back to life, I would not press the issue of doing it forever. Even a month of living on a cash basis could be enough to help you make the most of your hard-earned cash.
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