Harnessing the power of cash and debit cards to change your spending habits

The Habit of Cash is a key habit in #debtreduction, keeping spending in check, and being financially strong.

In an age of digital transactions and plastic cards, where for example in 2022 there were approximately 54.8 billion credit card transactions in the U.S. alone (Sandberg, 2024), the Habit of Cash may seem outdated. Having wads of cash to pay for regular items doesn't happen much! The Habit of Cash or using the debit card, which is much more convenient than cash for everyday purchases can be a powerful tool for mastering personal finances. This article explores the benefits of embracing cash and debit card usage, and how using them can contribute to your financial success.

Understanding the Habit of Cash

We consider the debit card synonymous with cash you have in your Bank's checking account. You use the debit card or take out cash, and your balance decreases instantly. The debit card is connected to exactly how much money you have in that account. The cash and debit card habit involves using cash or a debit card for everyday transactions instead of relying solely on credit cards. Why? As Dave Ramsey highlights, when you use a debit card "it’s your money. If you have the money, you can spend the money. If you don’t, you can’t." (Ramsey Solutions, 2022a). When you use the debit card, you make spending real and timely. Then you can't easily spend more than you have.

By using the Habit of Cash, you create a tangible connection between your spending and your hard-earned money, fostering greater awareness, and control over your finances.

Here are some benefits of using debit cards, as a form of the Habit of Cash.

1. Increased Awareness: When you're using a debit card, you feel the impact of each transaction more acutely than when swiping a credit card. This heightened awareness encourages mindful spending and discourages impulse purchases.

2. Better Budgeting: Using a debit card allows you to set spending limits for various categories. Once the cash or funds allocated for a specific category run out, you're forced to stop spending this month, promoting budget adherence and preventing overspending.

3. Better Tracking: As Dave Ramsey highlights, "It's much easier to track any money spent through online banking" (Ramsely Solutions, 2022a).

4. Reduced Risk of Debt: Debit transactions eliminate the risk of accruing credit card debt or overdraft fees. You don't pay interest, since it's your money and not the lender's.

5. Pay in full: With the debit card, when you pay for something, you've paid in full. You walk out of the store or make an online purchase, and it's yours free and clear. With a credit card, you're borrowing money, and there is always the likelihood of paying more. The interest and late fees make whatever you bought more. Why would you pay more for something you already have!? As Dave Ramsey highlights, "You can enjoy that paid-for vacation without worrying about the price tag coming back to haunt you later" (Ramsey Solutions, 2022b)."

How to Implement the Habit of Cash

1. Open your banking checking account

   1. Know how much you have right now. This relates to the Habit of the Hawk (being hawisk on your money).

   2. How much you have in the checking account is what can be spent till you get more e.g., when you get paid next.

2. Order a debit card

   1. If needed call or go online to your bank, and request the debit card connected to your checking account. You'll have a debit card soon.

   2. Most likely you already had one when your checking account was opened.

3. Set spend limits

   1. Divide your budget into specific categories (e.g., groceries, dining out, entertainment) and allocate a set amount of funds to each category.

   2. Track your spending closely to ensure you stay within these limits.

4. Use the Debit Card for Spending 

   1. Reserve cash or use your debit card for purchases, such as dining out, shopping, or entertainment. Limiting discretionary spending to these methods helps curb impulse purchases and promotes mindful decision-making.

   2. Every time you feel like pulling out the credit card, pause, you have a debit card that can pay for it.

   3. Challenge yourself to build the habit over time. Start increasing the number of transactions you do on your debit card, and eventually, you'll reach for your debit card first.

5. Monitor Debit Card Transactions 

   1. Regularly monitor your debit card transactions through online banking or mobile apps. Stay aware of your spending habits and adjust as needed to stay within your budget.

   2. Keep a record of your debit card transactions to stay accountable and identify areas where you can adjust your spending habits. This can be done through a budgeting app like EveryDollar, spreadsheet, or notebook. There are many other budgeting apps too, find a good one you like. The EveryDollar link is not an affiliate link, or a paid promotion of the app.

Conclusion

The Habit of Cash, for example using cash or your debit card is a simple yet, very powerful tool for managing your finances and fostering healthy spending habits. By embracing your cash or more likely the debit card, you gain greater awareness and control over your money. This reduces the risk of debt, interest payments accumulating, and promotes mindful spending. Whether you're striving to stick to a budget, curb impulse purchases, or simply take control of your financial destiny, incorporating the cash and debit card habit into your daily routine can pave the way to long-term financial well being.

To your success.