Are You Cash Averse?

Are You Cash Averse?

Are you cash averse? I used to be too. What’s the point of using cash when I get travel points using my credit card? Why deal with change? What if I lose my wallet? What if I don’t have enough on me?

My entire mindset about this changed when I decided to give it a chance and see what all the fuss was about in the #debtfreecommunity. I had been hearing in the financial coaching world that studies show people spend 25% less when they use cash instead of credit cards. The idea is that pain centers in the brain are activated when you spend cash, making it harder for you to part with, and at the very least, more aware of the amount you’re parting with.

credit over cash?

After hearing this percentage and discovering plenty of anecdotal evidence I tried to find out where this claim came from. Apparently there have been several studies in this area, but the one quoted by Dave Ramsey was published in Carnegie Mellon Magazine, a study by MIT.  The average is 12-18% lower spending when you use cash over credit but in a study done by McDonald's the average was 42%. So, in a fast food setting, people spent 42% more money when they used credit card rather than cash.

This made me think that even though I'm really happy with my budget and cash management system, I could push it even further and meet my goals faster, if I give this cash thing a go. A shift from planning to spend less and wanting to spend less, to feeling pain or loss when spending. Sounded like it was worth a try. 


First I tried it for our spending money only. I will share my budget process in a future video, but put simply, we budget based on a per paycheque model. So every time my husband or I get paid we would take out a set amount of cash for spending. For us, this budget line includes any coffees, eating out, clothing, and anything else we WANT. We are in beast budget debt repayment mode so this amount is currently $40 each per week. The amount doesn’t matter, this is not a one size fits all approach. Your amount depends on your financial goals, your financial commitments, your income, and your values.  The results were fantastic. Prior to this shift to cash we had been living off of $150 each per month and we would always feel the pinch as the month came to an end and the money was gone. The start of the month felt like freedom, but the end of the month was penny pinching, hating the budget, and waiting for the month to end already.  After switching to cash we were both amazed to see that our $40 was never gone (almost never, I'll circle back to expand on this later) before the next $40 came in.

This constant cash in my wallet gives me a feeling of great abundance. Even though it’s not a huge amount of money, it’s 100% more than I used to carry when I only carried plastic. It makes me think more about what I spend my money on, checking in with myself if I truly love, value, appreciate and/or need it. The cash comes with a feeling of abundance. These colourful Canadian bills awaiting their departure and promising guilt free spending; while the physical state of the cash reminding me that if I spend it here today, I can’t spend it somewhere else tomorrow. We might understand that logically, but seeing the bills turn to coins and disappear truly has a psychological effect, I'm buying into this science 100%. 


Let me get real here for a minute. You probably think that since I’m a beast mode budgeter,  I wouldn’t dream of using that precious $40 for a coffee on the run. It’s a popular comment by financial bloggers and others that all you need to do is cut out your daily coffee and you’ll be headed to Mexico on your all-inclusive. I’m not saying that’s not true, but sometimes on a hectic morning when the coffee machine wasn't set the night before, the thing that I really love, value, appreciate and need is a Tim Horton’s coffee to enjoy on my solo commute to the office. The point is, the way I budget my money allows me to use my money smarter, so I can still have what I want, guilt free. If I choose too many coffees, I won't get the new top. If I choose clothes, I won't be stopping for a Big Mac. Using cash makes the consequences of each decision appear in real time and and as simple as looking in my wallet. 

Earlier I mentioned that the $40 personal spending money is never gone by the next pay, but there was a week when that wasn't the case. In fact, it's not that the $40 was gone, but my husband had spent $12 OVER his $40 (Okay, now you're thinking I'm an unhinged budget lady, I know, I know, $12 isn't the end of the world) How could this possibly happen when using cash you might ask. First of all, bless this man. I am the one who overhauled our budgeting and cash management systems to make the most progress possible with our debt repayment and he has been hanging on for the ride. This shift to using cash was just another thing for him to come on board with and he did so without dispute. In that week he hadn't had a chance to get to the bank to take out his cash and so he was tracking it in his mind and used the MasterCard instead. Turns out his mind math missed a few things so when he went to transfer the money, $40 didn't cut it. 


Changing the way you budget or manage your cash is a big change. You want to be understanding when you or your partner doesn't follow the plan to the letter in the beginning. It might feel unnatural when you first start, but like anything, you'll get used to it. For us, it really highlighted how helpful cash is in sticking to the budget.

So are you still saying, “Yeah, okay, that’s great Danielle but what about the amazing travel points I get on my awesome credit card?” Yes I know, and I get it. I too have an amazing travel card which allows us to be able to afford to fly our family of four across the country to visit home 1+ times per year. HOWEVER, check out the awards % you are earning on that card. Along with other wonderful benefits not tied to dollars spent, I earn 1.5% flight dollars for every dollar spent.  Let’s review the percentages above. Even if using cash can reduce my spending by the lowest percentage indicated by the study,  12%, I am still 10.5% better off using cash over card. Instead of obsessing over your points or travel dollars you can create your own rewards by opening a savings account and nickname it “travel". The money you save by using cash can chill in there awaiting your departure.

Now, I’m not knocking the travel cards, I love the benefits mine provides. BUT you need to be honest with yourself about your credit card behaviour. If you do not pay the statement balance every month, remember you are paying the full interest amount based on the statement balance regardless of how much you pay onto the card that month. 


This is how we use credit cards now.

1)      For gas, because I don’t want to leave the kids alone in the car to run inside with my cash. I transfer this amount on to the credit card on the same day I fill up…if not immediately afterward in the parking lot.

2)      For some online bill payments. Again, I transfer the amount onto the credit card, possibly even before I make the bill payment.

3)      For some automatic payments like Netflix. I also treat this like a regular bill payment and pay the amount onto the credit card within days of the transaction.

All other discretionary items like, groceries, our personal spending money, family spending, and eating out budget amounts are all taken out in cash every pay day. 

The other thing I love about this method is that we end up with a wad of cash for one week. If in one week we spend more on groceries, we might spend less on eating out and other family spending. If we have a crazy busy week and eat out more than we budget for, it’s okay, it doesn’t have to be guilt ridden, we can pull from other categories. We are more focused on coming out ahead overall each month, than beating ourselves up about staying within rigid individual budget allotments.

If you still feel like cash would be a pain, challenge yourself to try it for a few months.

See what happens, it may surprise you.