Leave your cards at home and use cash.
This simple rule as been generalized as a catch all solution to financial trouble, and while it may have some truth to it, it is not an adequate solution to financial management. For a lot of people using cash does help them spend less. For these people seeing the money physically move from them to the seller is enough to stop unnecessary purchases. However, there are very few absolute rules. There are those who actually spend less with a debit card. For these people using a debit card brings the realization that the transaction will have to go in the checkbook (or spreadsheet) whatever you choose to use, while having cash on hand makes them feel more liquid, like this money is not committed.
When some people read this they will be tempted to say, "Well the people who believe that are just not disciplined, they need to use the envelop system. Everyone spends less with cash, people who say they don't just don't know money management." Do not fall in this trap! Everyone is different and generalizations are risky to make, thus different people require different money management strategies. Many will in fact be better off with cash, but some will be better off with a Debit Card, and some may even be better off with a credit card!
It is important to determine which money management strategy is the best suited for you and it is more complicated than cash or card. You must also decide on a record-keeping strategy. Some examples include the envelop system, the tried-and-true checkbook, the spreadsheet, or maybe even an accounting software program such as Quickbooks. Simply using online banking is not reccommended as a recordkeeping strategy. Some may prefer it, but it can be difficult to keep accurate records, particularly if you and your records disagree. Online banking, you, and even the receipt, can say different names as the seller, thus making online-banking is a poor choice as a sole record-keeper. Utilizing online-banking very acceptable, but not alone!
If you are trying to figure out your prefered method it is a good idea to start with the envelop system. This is the most conservative method of money management and thus will cause the least amount of problems if it is not right. Give this method a honest try for a significant amount of time. You really need 6 months or so to determine if the envelop system works for you. Do not simply jump to a debit card and especially not a credit card because it is convenient, or because you want to use that method. The truth is the best method for most people is a cash-based management system. And those who are better with cards are not better money managers. It is simply the mindset of the individual.
Why is a right money management system so important to find?
Simple. For the same reason the highway as lane lines and guardrails. Think of the lane lines as your plan. When driving in a lane people do not intend to venture outside of the lane lines, outside of a few driving exceptions such as passing. However, people do cross over lanes. It maybe their own fault or the fault of another person, or it may even be natural causes, and it is these situations that make guardrails a very useful feature. Once again no one plans to hit a guardrail, but if you do, you would be glad it was there because a guardrail keeps you in a safe zone. You can think of your budget as the lane lines that you intend to stay in, and your money management plans as the guardrail. You don't intend to go off track with your budget but if you do your money management plan prevents you from going into a danger zone.
A common response to this message is, "I have self discipline, other people need this but I don't." While you may have self discipline, no matter how strong it is, relying on discipline for a guardrail is foolish and, quite frankly, egotistical. There have been amazing pastors who have gotten caught in sins involving money, lust, and affairs. Pastors are people who are held in high regard in the area of self-discipline, and even they fail can fail when they trust self-discipline as their "Guardrail." Guardrails are not designed to be used, but they are very good when you stumble in life.
Think about your budget, your cash management plan, and your record-keeping strategy. These are often overlooked because they are an unexciting part of finance, but they are some of the most crucial parts of the foundation of a solid financial life. Getting these things right will help you be better in all areas of finance. Financial Counselor's are available, ready, and willing to help you determine the philosphy that is best for you. In true financial counseling you will not be given a one-size fits all solution. In true financial counseling you will be in discussion with the counselor. The counselor will help equip you to make the right decision by asking you questions, providing you with new knowledge, and helping YOU generate new and unique ideas.
If you desire to think and discuss this more you can visit www.kpgfinancial.com.
