I’ve heard more times than I can count “I don’t know where all my money goes.” People carry little cash. Heck, some stores don’t even take cash anymore. Few families keep a check book. It’s no wonder it’s hard to keep track of where your money goes. Without the tangible activity of pulling cash from your wallet or subtracting from your bank balance, there is little connection to your money.
This idea hit home several years ago. I’ll never forget the time when I was grocery shopping with my daughter. She was about six at the time. I had just checked out, paying with my credit card as always, when I realized I had forgotten the bread. Thinking it would make Kaye feel like a big girl to go through the check stand on her own, I gave her some cash and the bread and urged her to get in line for the cashier.
She looked at me like I was speaking a foreign language, and panic began to creep into her eyes. She held up the money and asked what she was supposed to do with it, and shouldn’t she have a card?
I was stunned. I didn’t realize that she didn’t understand what cash was, or that paying with cash or a card were essentially the same. Without that understanding, she couldn’t know that spending using a card was ultimately constrained by how much cash was in the bank.
Our family pays for everything with a credit card. It’s a tool. It has never made me feel less connected to my money. I am viscerally aware of every dollar I spend, whether it’s cash or card, and we pay off our credit cards every month.
But we are unusual. Only about a third of Americans pay off their credit card balance every month. A credit or debit card or payment app obscures the feeling of giving up money in exchange for whatever is bought for most people. That makes it emotionally easier to let your money go, and that can be a recipe for overspending.
Society is moving away from cash, and there are positives and negatives that come with that. If the negative for you is that you don’t know where your money is going consider approaching your spending differently.
Create a plan with a specific goal in mind. Before you spend any money from your next paycheck sit down and decide how every dollar is going to be spent. Be realistic. You need a plan you can stick with. But cover all of your bases. Make sure you are including money for expenses that don’t show up as regular bills, like car maintenance or celebrations.
The only way to keep your connection to your money is to be intentional with it. Cash may no longer be king, but you can stay in control. Rather than letting your money decide what you will do, decide what you will do with your money. Your financial security and your goals require you to make a plan, and understand where every one of your dollars goes.
For a comprehensive, step-by-step guide to building your own financial plan, pick up my award winning book, Save Yourself; Your Guide to Saving for Retirement and Building Financial Security. It is available on Amazon.