Hello, I'm your host, Mr. Chuck. I'm a retired accountant, turn truck driver, I have reduced my debt to zero in a short matter of time. debt reduction to achieve financial freedom takes commitment, confidence determination. Do I use cash or credit when I'm out and about buying things? We'll discuss this topic when I get back in one moment. Together, we're going to explore our finances and figure out how to improve them. reduce debt increase wealth is a podcast to form those to improve personal finances. Whether it's eliminating debt or making smart investments should you pay with cash or plastic. That is what this topics about this week, this episode. In my first article is grow acorns.com cash versus credit card saving money. And I'm not going to read the whole thing. I'm just going to go over the highlights. Experts say using cash over plastic could actually help you say, but during the past 12 months, I've done almost exactly the opposite. And the impact on my bottom line couldn't be clear. Not only I've been able to clearly track where my money is going, I've been able to take steps to cut back on unnecessary purchases, and put extra money towards my savings goal that I otherwise may have spent. And this is from the author's point of view of the article and why I plan to stay largely cash free in 2021 and why it's been working so far. I don't need cash as much during a pandemic. I never intentionally set out to scale down my cashews, with less of the need to spend during the pandemic has just been super easy to overlook. Even before the crisis, though, I would rarely have changed for things like valet tips and other miscellaneous expenses. reaching out for my debit card or phone to pay is packed practically second nature. I love the perks I get was plastic. When you use plastic, you get poor perks or rewards and you can build those up. As long as the things you normally buy. You get rewarded for it. I'm alright with it. But just don't use plastic and buy a lot of stuff that you normally don't buy. Whether you're using credit or debit, the whole deal could be more secure. carrying around lots of paper bills can be risky. Since there's no institutional safeguards in place. If you lose it. If your card gets left somewhere or stolen error, you can report it to your bank and get a replacement. Plus, if you become a victim of fraud, or theft, there are protections in place to reimburse you. These are the pluses of using plastic. Keep in mind, especially when making major buy says Greg McBride, Chief Financial Analyst at Bank Rate, proving past purchases is much easier with a digital record. There's no universal advantage to using cash. He told CNBC made it last year, cash offers no protection from loss, theft, or fraud that you're afforded with credit and debit cards. It's easy to track and limits my spending. convenience and safety aside, the biggest benefit of going cashless for me is being able to take a crystal clear look in a financial mirror and track my spending through some online banking. When I log into my account each month to pay bills and assess my finances. There's no question of how much I spent where and what on. That picture isn't always pretty, but it's always accurate. It's certainly a plus, if you're looking to get in the details with your budget. He only looks at his checking account once a month. He should be looking at your checking account once a week. And you will find these things quicker. You can't buy everything online with physical cash and you can't pay for your Uber Netflix or Spotify with cash. Unless you're digital in about saving physical receipts spending with plastic or via bank account also allows you to use tracking apps that can help you allocate and save money better. When he says via bank account and think he's referring to a debit card. I would have never guessed I spent almost $400 in one month on erbert Uber Eats if I hadn't seen the numbers for myself, all on the same screen. More importantly, I wouldn't have taken action to scale back. So simply by cooking more meals at home and eating more cashews. That's his thing, I guess. If he would have been looking at his checking account on a weekly basis, he could have identified his overspending on Uber Eats a lot quicker, and he wouldn't spend a $400 that month, he could have scaled it back sooner. That's my point of view. That's my emphasis on you need to know your happy numbers. But there are two sides of the coin going all cash diet helps 20 something year old Christy Epperson avoid overspending and eliminating 20,000 in student loans and car loan debt in one year. Well, that may be seem like an extreme example, study after study showing using cash can help you be more disciplined with your budget. So if you're less likely to buy something, if you're paying cash, then you maybe want to consider staying on that route. If you treat your credit cards, like cash, or all your plastic, whether it's a debit or credit, like cash and think to yourself, this has to be paid by the end of the week, do I have the money to pay for it, and then pay your credit cards off every payday, whether it's once a week, every other week? Whatever the case, that's what I've done. And this article has a bunch of stats in here. And you can avoid fees by paying cash the extra fees that some merchants charge you. And it's a preference, it's using cash versus credit is most likely gonna be based on your age and what you're used to doing, the younger generation is going to be using plastic, and the older generation is going to be more likely using cash. There is a envelope method of budgeting where you use all cash, the envelope budgeting method, this is how it should be working. This was a budgeting method that was created way before online banking, and the popularity of debit cards and credit cards. It's a simple concept. Back in the day before 1970, before that you received your paycheck. They wrote you a physical check. Some places even just paid you in cash. If you work, you know a day job where you just got paid every day, they gave you cash that most places wrote you a check and hand it to you, then you had to go to the bank and deposit it in your checking account. In order to get it out of your checking account, you had to write a check, which is time consuming and cumbersome when you're at the grocery store, or anywhere else. So people got in the habit of withdrawing cash to take with them further weekly cash expenses, which would be groceries, gasoline for the car, and whatever else they may need to spend. So they could forego writing a check, which was cumbersome. So the budgeting envelope method was he took your cash, and you put it in an envelope that you would categorize groceries, gasoline, clothing, whatever categories that you would have, and you'd put your money in there. When that envelope became empty, and you know you would buy something and you would take your change and you put it back in that same envelope. When that envelope was empty, you no longer had the money to buy that particular item that you budgeted for. So this control your spending. That is not realistic way to do things today. With the use of debit cards and credit cards, should you be paying in cash for things when you're out and about groceries, dining out, gasoline, car repairs, whatever you have, or should you be using your debit card? Beware using your debit card on your main checking account. You're open yourself up for phase two can maybe steal that information and then drain your checking account of all its money because they have your debit card information. So it'd be a little bit safer to use plastic, but they can steal that information and make a bunch of charges on it. At least they're not taking your money, they're just charging it up and spending your money. But your credit cards has protection. So once you identify something that you didn't buy, you can dispute it. And I think the total loss is 50 bucks. If they you know, if you didn't catch it soon enough. So it's important to know your happy numbers you used to know them by using the cash method. Because you'd had to know how much cash to put in all those envelopes. How did you know how much to put in there if you didn't know your numbers, so you need to know your happy numbers. What's your net pay, what how much is your rent or mortgage? How much are your credit card payments, how much your utilities how much you spend on entertainment, how much you spend on groceries, and gasoline and car repairs on and on we go you need to know your I call them happy numbers. So now I found this article, how to hack the cash envelope system to forego using cash. So this article is a workaround. This is from the penny hoarder calm envelope budgeting method without using cash. So there they came up with a workaround for the envelope budgeting method. The cash envelope system is a great way to keep yourself from going over budget, your spending is less restricted to the amount of money you fill in envelopes to represent different budget categories. The Pam danik, however, has made it less convenient to stick to this budgeting method. Many of us are doing more shopping online, and many are avoiding the germs that handling cash may expose us to fake install follow the basic principles the envelope budgeting method, without using cash. Here are four ways they suggest. One use gift cards. Instead of stuffing your spending envelopes with cash use gift cards at the beginning of month, purchase gift cards that corresponds with your various spending categories. Once again, you need to know your happy numbers, you need to know how much to put on each one of those gift cards, then that gift card becomes your envelope, when they run out of money you won't be able to spend, so you got to be important, you mark that gift card, which category it is. And once it gets to zero, you won't be able to spend any more money to use a budgeting app based on the envelope system and they recommend two apps. I'm not going to say what they are you can go to the article and review that. I think if you're going to use any type of budgeting app, it should be able to download on your main computer at home and have an app you put on your smartphone. So you can sit at home with a bigger screen and figure out the numbers for your budget. And you can look at your online checking account and look back for 30 days. To see how much you spend by category. You can add them up and plug numbers. It's not all that difficult. He just have to take the time and have a little bit of patience to get it done. You can use multiple accounts for different types of spending. Another way to create digital envelopes is by using separate bank accounts for different areas of spending, you may want to stick to just a few broad budget categories. So you don't end up having to open a bunch of bank accounts. If you have a bunch of bank accounts at the same bank, they're most likely going to start charging you fees. You don't want to pay any more bank fees than you have to. When working with multiple bank accounts. You want to maintain a master account where your paycheck comes in, and then distribute money into each spending account. You can set up bank alerts let you know when your balance reaches a certain level. So you're careful not to overdraft. Somewhere in there. They say in check with your bank to see if they will allow you to set up sub accounts. And then you can use them to separate your money for different uses. He also need to ask your banker if you set up sub accounts, is there a minimum balance you must make maintain and that account, it could cost you a bunch of extra cash that in order to avoid bank fees. You're gonna have to not use Use. Number four, track your spending after every transaction, yay. The last guy only checked his bank account once a month. Here there recommend and track your spending after every transaction. Keep yourself acutely aware of your spending, as it happens is another way to stay within your budget limits. Make a makeshift ledger you can carry around with your debit card, it could be an empty envelope, an index card or a small note book to record your spending. That's where the budgeting app on your smartphone comes into play. You set up your budget on the main on your main computer at home, you then download that or transfer it to an app on your smartphone. When you walk into a grocery store, for example, and it's the middle to late in the month, you open up your app and you look for groceries, how much money do you have available to spend, so you do not go over budget, then you know, when you go to that grocery store at that particular moment, you know how much you got to spend. Maybe it's $150, maybe it's $50. But you got a guidance got a guideline. And if you're over over a particular category, maybe your budget amount is incorrect, maybe you have it set too low, you need to increase it for future use. Now, if it's only $1 or two, don't worry about it, because that's gonna even itself out over time. But if it's $100 difference, you may want to look at increase in your grocery budget. Look at other places, other categories that you can decrease a little bit, say $10, another place $20. And another place to help make up for it. So your overall bot budget is still the same as it was. So you're not reducing anything that you're trying to save. Which method should you use to pay for things when you're on the go cash or plastic? I really didn't answer that. Because it depends on the person, everybody's going to be different. The younger generations could be most likely going to be using plastic. And the older generations most likely is going to be using cash. Because that's what they're used to. The cash envelope method may be a good method, if you have younger children, and you're trying to teach them the value of money, you give them an allowance. And you want them to save a certain amount. And they're allowed to spend a certain amount. You can set up an envelope method for those younger children, and you can pay them in cash, and then they can separate the money into the different envelopes. And once they have an envelope that's for savings, and they have 20 or $30 in there, you can take them to the bank and have a savings account open up and they can deposit that money into the bank. And the banker can give them the receipt and show them how much money they have. Overall, it's a good teaching tool. But to use the cash envelope method and actually pay cash, I think today is unrealistic. Because it's so hard to pay cash for everything. You have to go out of your way. And you're gonna have to pay extra fees, maybe go somewhere where you can pay all utilities, and they're going to charge you a fee, go to a bank and pay your mortgage and they might charge you a fee. Everybody likes to charge fees. So be aware of that. So do you use your debit card or a credit card when you're out and about buying things? Beware, if you use your debit card, somebody could get that information and steal all the money out of your checking account. If you use a credit card, they could get that information and charge up a bunch. As I said before, you have some safety on the credit card. Because once you identify something you didn't do, you can report it and your loss is limited. I believe it was $50. But that's not what I do. I kind of did the approach where you set up different accounts. But I have a robo investing account that offers a debit card or a checking account. So I, I applied for a checking account through my investing app, and I got a debit card. So I put a certain set amount of money in there, then I use that debit card to buy things and it does two things, it keeps me from spending too much money. And if somebody would steal that information, they only can steal what's in there, which is not really a whole lot of money. So and it's at a different bank. So that's one way you can prevent people from getting into your main checking account. If you have these sub accounts, maybe the bank is going to give you a debit card, and each one of those, and that could be the same thing. They only can get the information now that one account. You may run that by your banker to see how that would work. When you ask him for fees, and whatever other things they might be charging, and I'll be back in one moment with my final thoughts. If you listen to this podcast using an apple podcast app, please rate and review this podcast for all your non Apple users. You can download iTunes on a Windows machine and go to the upper left hand corner, select podcast, do a search, reduce debt, increase wealth, you can subscribe to the podcast. And you can also rate and review the podcast. I appreciate any feedback that I get. Whichever method you use, cash or plastic is gonna be depending on your personal preferences. If you want to start switching over to plastic, the gift card method may be a good way to start switching over. Then eventually setting up sub accounts off your main checking account eventually be done. With today's technology, online banking, instant access to your information. There's really no reason why using a debit card or a plastic won't save you and help you with your budgeting just like the cash method did years ago catholicmatch method may be beneficial to help teach your younger children how to control their money and not let the money control them. Whichever method you choose to use is up to you