Managing your financial life is not just about money.

Overspending with Credit


I think credit card companies are doing a wonderful job of turning consumers into over spenders.  That is not meant to be a derogatory comment to readers because I admit I have fallen victim to spending money on things I really have no need for.  It’s just too easy to spend money using a credit card.  There is not enough of a relationship between a swipe of a card and a reduction of wealth.  And there is certainly not enough of a relationship between a one-click purchase on a website that has stored your card and a reduction of wealth.  The points, cash back, or air miles that are awarded to you are certainly enticing.  My credit card gives 2% back in the form of gift cards, which seems like free money!  But think about it.  How much less would you spend if you used cash instead of credit cards?  Would you spend 2% or more less?  I have to imagine people would easily spend 5%-10% less, so I decided to test the theory on myself.

I told my husband to hide my credit cards from me and give me a set amount of cash each week.  I figured out how much I need for groceries and left a little wiggle room for discretionary spending like shopping, eating out, and entertainment.  It’s been about two months and already my spending habits are drastically different.  I no longer shop aimlessly and I am no longer driven by want.  I shop with a purpose and I am driven by need.  If I don’t need it, I can’t bear to part with my cash because I know it’s a finite amount, and I have to buy food for the three kids after all!   This has been liberating for me.  My generation has grown up on credit cards and as a whole, we have no clue how to spend money responsibly.  After a few more months go by, I will report how my savings went.  I know my savings will far outweigh whatever benefit I would get from a credit card company.  I look forward to no longer being sucked in by their game of rewarding people for spending their money.  I will reward myself by saving it.

Alyssa McNamara Reed, CFP®

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