When we have trouble handling money day to day, who is the enemy? The answer may surprise you…
Several university-based research studies say the problem is the actual plastic itself. That’s right. When you pull out plastic, the reality is that you do not value a dollar the same as when you’re using cash. The studies have found this to be true with gift cards, stored value cards, credit cards, and debit cards.
When you are paying with any form of plastic, you are willing to spend quite a bit more money even for the same item.
Plastic makes you willing to pay twice as much
Listen to this from a study called “Always Leave Home Without It,” which was mentioned in a recent New York Times article. In certain situations, you are likely to be willing to pay twice as much for an item when you know you are paying with plastic. You lose your price sensitivity.
Again, it doesn’t matter whether it is a gift card, a stored value card, a credit card, or a debit card. The plastic itself is the curse.
When I counsel couples who are having trouble with money, I tell them that going to a cash allowance gets it done. I’ve seen it again and again; having to live on cash, with a set amount you take out each pay period, in combination with burying the plastic…well, that will change your finances dramatically usually within 6 months.
So if you feel out of control with the spending, take the plastic out of your wallet. Get cash once each pay period and live on that amount until the next pay period. You will be stunned how easy it is, and likely you’ll get your finances under control. Because you have that amount of money that thins between pay periods and it makes you sweat every dollar. Nobody sweats swiping plastic though!