-Debt Free Hispanic

Changing your commute length or car efficiency would be the ultimate change though.

Her psychology seems to be that cash is “extra spending money” and that the credit card (paid off in full each month) is for regular purchases.

I became a cheapskate. I made my DH miserable, I ate out of the pantry because I refused to grocery shop. I spent less than 1/3 of our normal spending on groceries and eating out. The 2 categories we went to cash on.

But all I did was use food we already had, so next month it’s likely we will be spending more to replenish our food stock!

Dave Ramsey indicates cash is best, a debit card second best, and credit cards are the worst, based on human psychology. Seeing the cash leave your hand for the cashier’s is a bigger impact than just sliding the plastic and looking at the numbers – for most of us, anyways.

I also seem to remember Dave Ramsey himself uses a debit card as a credit card on occasion.

In 2007 we’ve switched from credit cards to a debit card each, but we had so many other variables change that I can’t guarantee the 12%-18% drop in expenses from the switch.

I avoid cash as much as possible because it’s so difficult to follow the spending trail that way. We use our credit card as much as possible and pay it off every month, earning a 1% rebate that I often deposit directly into my Roth IRA that is linked with the card. I do keep close tabs on our spending by checking the credit card statements a couple of times a week – it’s a great way to keep track of how often you’ve eaten out, how much you’ve spent on groceries, gas, etc. Much better than cash.

For those who can control themselves, credit card is king!

Let’s say you own a car that has a ten gallon gas tank. Now lets say that same car gets 200 miles to the tankful, or 20mpg. If you are forced to drive it 400 miles a month, you are going to have to fill up the tank twice.

How is using cash to fill the tank better than using a 5% reward credit card where the balance is payed in full at the end of the month?

The obvious answer is, it’s not. Using cash in this scenerio is a mistake. If the price of a gallon of gas is $3, using cash costs you $60. Using a reward credit card, the gas costs you $57.

That is why the theory of using credit cards makes you spend more is a myth. If the tank only takes so much, there is no way to overspend, which brings me to my point.

What matters most is discipline, not the tool you use in your transaction. If you are disciplined enough to control your spending, a rewards credit card with the balance paid in full at the end of the month is your best option. If you go to the grocery store and your budget says you cannot go over $100, the undisciplined person brings only $100 in cash(the tank is full). The disciplined individual brings a 5% cash back reward credit card with a $10,000 limit and only spends $100 (filling the tank).

Cash is a lot harder to track. I have found myself saying the exact same thing to my wife.