Podcast: Play in new window | Download
What is the most powerful payment option?
The greatest tool that lets us live on less than we make and have more money to eliminate debt is an option that has been around for ages. The most powerful payment option is Cash.
The awesome benefits of paying with cash
- Will make your budget go farther
- Accepted in more places than Visa, Master Card and American Express
- It is fully endorsed by the U.S. Government (which could be a good or bad thing)
Greg Pare is a Financial Coach that works with hundreds of couples every year. The most powerful tool in his toolbox are paper envelopes. Greg makes his clients give up the plastic and go to cash – and they are grateful for it.
Why? More of their money goes towards the things they want because it no longer is being spent on impulse items and unintentional purchases.
The power of cash envelopes
At first, these paper envelopes look average and generic but write a budget category on the front and it takes control of your spending. When you budget $400 a month for groceries and put that much cash in an envelope labeled “groceries” you will mysteriously spend $400 or less. They are magic envelopes!
Greg Pare also coaches people to put money away for non-monthly expenses. Cars break down, houses need upkeep, and there is this big winter celebration that inexplicably appears on December 25th every year. You want to be ready for these “surprises”, so stashing $20, $40, or $100 a month in cash envelopes allows you to keep know precisely how much you can spend at a moment’s notice.
The problem with swiping
Many people prefer to use credit cards for the convenience. It’s easy to swipe, it’s a speedy way to pay, and you don’t have to record every purchase. Visa and MasterCard love to track your spending for you and allow you to look back at what you have spent.
The problem with swiping is you tend to overspend. Studies have shown that paying with cash sends a small signal of pain to the brain. Using plastic greatly reduces this pain. The pain is exactly what we need to remind us that something just happened to our money!
Create your own money scorecards
Want to win with money? Get control of it by locking it up in paper envelopes and only let it out when it’s their turn to play. For example: Putting $100 a month in a car maintenance envelope for twelve months gives you the win over a $1,200 car repair. $50 a month for a year turns into $600 for Christmas.
Dollar bills in envelopes become the scorecard that proves you are winning at personal finance.
Cash envelope categories
Greg recommends creating cash envelopes for the following categories:
- Christmas
- Car Repair & Tags
- Groceries
- Vet
- Clothing
- Household Items
- Eating Out
- Medical
- Gifts
- Dry Cleaning
- Haircuts
- Fuel
- Lawn Care and Gardening
- Hobbies
- School Supplies
- Travel/Vacation
Start with a budget, fill the envelopes with all or some of your budgeted amounts, and start winning with money.
Thanks to Greg Pare from GregPare.com for coming onto the show. You can find more of Coach Greg’s teachings by reading his blog http://GregPare.wordpress.com
