We are turning our focus on saving money, and every week we are going to tackle a new way to save on things you're already spending money on. By taking action and doing some of the stuff we're talking about here in this series, you can build your first emergency fund and pay down tons of debt.
The next tip I'm sharing is how to save tons of money by using an old school tool called CASH!
Do you have discipline?
When it comes to credit cards, you must be highly disciplined because it’s easy to spend more than you can afford. McDonald’s reported that their average transaction rose from $4.50 to $7 when customers used credit cards. If people are overspending at McDonald's could they be overspending on other purchases?
Science has produced several studies that raise some eyebrows on the use of credit cards. One of these studies I found rather interesting. George Loewenstein, a Carnegie Mellon professor of social and decision sciences and co-author of a paper found in the journal of “Neuron” states,
I bolded two words in that quote. The first one is anesthetize, which means to administer an anesthetic, like when you have surgery or when you go to the dentist. They numb the pain, so you don’t feel it.
The other word I bolded is pain. Lowenstein’s study, which was to see if pain centers of the brain would activate when a person would see prices, found that insula activation discouraged spending.
Here's what Lowenstein said,
What does this mean? Our brain registers pain with prices, and the higher the pain, the less spending we might do because of the increased insula (triggers more pain). But as Lowenstein stated, credit cards anesthetize, AKA numb the pain of paying. Interesting, right? Maybe those credit cards are costing you more than you think and you don't even know how painful it is?
How can CASH help you save money?
As I just said, science has proven that you will spend more money when using credit cards. So when you switch to using just cash for your purchases, you likely experience instant savings.
It holds you more accountable.
Once the money runs out it runs out, there is no more spending. But when you use a credit card, or even a debit card, you can get this feeling that you have unlimited funds.
You will likely spend less.
Being that your brain registers pain with using cash and prices as it was discovered in Lowenstein’s study, you will spend less.
Save on interest and fees.
Once you switch to cash, you won’t be piling up more and more debt and paying high interest fees.
With just a few simples changes and spending a little time, you can save yourself tons of money, freeing up cash to save your first emergency fund, pay down your debts, or even saving for your future! Go ahead and get started and I can't wait to hear how much you save!
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