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Tuesday, August 14, 2018

Greetings Thrifty Friends,

I recently read a story about a woman who broke her own, personal revolving debt cycle by ditching her credit cards and going cash only.

She said that her biggest fear was not having a credit card there for whatever she needed and having to relying on cash.

I am happy to read about another person who is free (or at least on their way to being free) of debt, but if ditching her credit cards was an actual hurdle for this person, it shows a dangerous misconception of money.

Keep pinchin' those pennies,

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Personally, I am more afraid of credit cards than I am of cash. Yes, credit cards allow flexibility in spending, but with cash in your pocket you know exactly where you are financially for the week, or the month, without having to keep track in your mind of how much you have charged, what your balance is, how much credit you have left, and how your next purchase will affect the payment you have to make at the end of the month.

Here is where a budget pays off.

This is how I do it: I get paid every two weeks, so I make a list of my monthly bills and divide them by two.

- 1/2 of my mortgage payment (plus an extra $50 for an over payment).
- 1/2 of my electric bill.
- 1/2 of my gas bill.
- 1/2 of my phone bill.
- 1/2 of my cable bill.
- 1/2 of my insurance payment.

I don't have a vehicle loan payment, but if you do you would add 1/2 of that as well.

I also have a small amount directly deposited into my savings account that I never see.

Adding all of those up I subtract the total from my check and whatever is left over is my spending money for the next two weeks. That's it. It's about 10 minutes of fifth grade math.

Grocery money, gas money, lunch money, going out for a couple drinks Friday night after work, it all comes out of that cash.

You might be thinking, 'That's kind of limiting, isn't it?' And you would be right, but that is exactly the point. When you have $100 in cash left for the week it is easy to choose between groceries and a new purse or a new pair shoes.

And you can still keep a credit card for flexibility (and emergencies). I do. I have put meals, and clothes, and travel expenses on my credit card, but it is not a part of my regular spending habits. Because of that my credit balance has never ballooned out of my control. And that is what a credit card is for; SUPPLEMENTAL spending power, not your exclusive spending option.