NORTH TEXAS — Cash allowances aren’t just for kids so they have money to spend. They’re also for adults trying to stop themselves from spending too much and racking up credit card debt!
It’s called a “cash diet.” Once you pay off or set aside the money required to cover your regular bills, like housing and utilities, you take whatever you have left, turn it into cash, divide that into weekly allotments, and only spend from that amount — once it’s gone, no more spending until the following week. If you do need to make a digital or card purchase, you need to subtract that amount from your cash amount so you don’t go over your limit.
With the average U.S. household having more than $15,000 in credit card debt in 2017, it’s not a bad idea if you struggle with self-control, and physically seeing your money leave your wallet drives home what you’re doing with it better than simply swiping a card or tapping a button.
“It’s never been more difficult to get out of credit card debt than it is today,” says Steve Cotton, president of Cotton Wealth Management Associates, LLC. “It used to be you’d use a credit card to buy [big-ticket items like] a washer or a dryer or a television; now people put Starbucks on their credit card. It is absolutely insane to be paying interest on a cup of coffee, but a lot of people do that.”
One reason for using credit cards to pay for anything and everything is the perks and rewards that come with them. But those rewards might not be worth it if you’re carrying a big balance each month and paying lots of interest on it.
“Credit card companies are very good at encouraging the free use of credit, but they’re not very good at educating consumers,” says Cotton. “They are also very good at trapping you in high interest-rate situations.
“Do not ever miss a credit card payment date, because the credit card companies use that as an excuse to jump you up into a higher penalty rate if you are late.”
While it’s easier said than done, another positive of doing less digital and card purchasing is lowering your risk of identity theft. But no matter how you choose to pay for stuff, the point is to find ways to not get as much stuff in the first place.
“Most spending problems are behavioral,” says Cotton. “You can change the trajectory of your spending by little things. For example, don’t go out to eat as much. When you [do] go out to eat, don’t buy alcohol because there’s a huge markup.”
We suggest you take his two cents and spend it wisely!