The Value of Money

Well, I have come to the end of my week-long experiment in spending cash only. I realized after the first couple days that although the long-term goal here is greater frugality, for the sake of this experiment, I needed to actually spend money so that I would be able to judge the difference between paying with plastic and paying with cash. Ergo, I stopped hoarding the cash and started allowing myself to spend it.

A few observations follow:

1. Paying for food in cash really makes you think about what it is that you're buying and eating. For example, on a busy night this week, in conjunction with my roommate, I ended up stopping by Hideaway to pick up a pizza. Typically, no big deal (and it's not like I go there very often). But when the guy told me it was $16-something for the medium pizza, I have to admit, I was rather taken aback--knowing, in particular, that there was a Little Caesar's just down the street where I could get a large pizza for $5.

Was it worth it? Yes, in the moment. It was really, really good. And I think there are times when a splurge is ok. But will I think more about where I'm buying pizza or other food-to-go when such occasions arise in the future? You bet I will.

2. Suddenly, coins are valuable. I mean, they're money, so of course they have value. But how many of us stop to think about the value of coins? Rather, we drop them in the drive-through or lose them in the laundry. (Well, I don't, but a lot of people do.) But an accumulation of just a few coins equals a dollar--a whole dollar!--which can also be spent without breaking a bill. This leads to my third observation....

3. It's a lot easier to spend small bills than big bills...and a lot easier to spend coins than any bills. I'm sure someone out there has done a study on this, but for me, it was kind of a different idea. It didn't hurt so much to break a $1, or a $5, but handing over a $20 was a big deal. Ouch! Especially when I didn't get much change back. Suddenly, I started having thoughts of, "Will I need to stop at an ATM before the end of the week? What if I don't have enough left for [fill in the blank]?"

I suppose here is where budgeting makes a difference. Although I didn't go crazy spending money (or probably even spend as much as I likely would have in a typical week), I know I could have been better about planning what money was going to go where and approximately when that expenditure would occur. I still haven't committed myself to the envelope system, but I can definitely see how it would be useful.

4. Eating at home makes a big difference. I packed my lunch every day this week, and I ate dinner at home most of those days as well. The thought of wasting my cash on food that wasn't already in my refrigerator was more than a little distasteful.

5. Paying with cash forces you to have to think. What I mean here is that when you pay for something with plastic, you whip out the card, hand it over, and voila! You have paid. When you pay in cash, you're suddenly confronted with such things as counting. Granted, counting is not difficult, but it's something that has to be done, and since you often don't know the exact amount of a purchase until the cashier has added tax to the bill, it's not always easy to have the exact amount (bills plus coins) ready to be handed over right away. You have to stand there for a couple seconds and fumble with the money until you count out the right amount.

Now is this a big deal? No, not at all. But if you're used to paying with plastic, those extra seconds seem to drag on and on and on....

Same goes for tipping at a restaurant. When paying with plastic, you just put the card on the table, and when the server returns, you have really an unlimited amount of time to calculate the tip. I was at a restaurant yesterday, and suddenly realized that when the waiter set the bill on the table (and the person I was dining with had her card out and ready for her ticket), it seemed that all of a sudden, I had to get the appropriate bills out of my purse so the server could run both tickets at once. And what I wanted to do was give the perfect amount and say, "I don't need change." But I didn't. I felt the haste of the moment and just plopped down a $20 and waited for him to bring me change. Now, could I have asked him to come back after I'd had a minute to prepare better? Certainly. But I was so used to the convenience and relative speed of plastic transactions that it didn't feel right to do so.

6. Some things are still better paid in ways other than cash. For example, as discussed in Dan's comment on my earlier post, gasoline. I didn't have to buy gas this week, but if I had, it would have felt very inconvenient to go into the gas station to prepay and then go back out to pump my gas. I like paying at the pump--a lot. Some people have recommended buying gas station gift cards, while others have advocated using regular debit/credit cards for gas. I can't see myself taking the time to go into a gas station on a regular basis, so I'm pretty sure the gift card idea isn't my best option. But the debit or credit card? Yep.

Another thing you can't really pay with cash is an electric bill, which I did pay this weekend. Granted, I could have driven somewhere in town where I could stand in line to pay in cash, but to me, that is completely counterproductive. This is why having a bank account with online bill pay is so valuable to me. You can pay your bills directly from your checking account, from a single screen on the computer. No late fees, no stamps, no reminders to drive past the post office on your way to work. It's a beautiful thing.

In spite of a few items that are really better off paid using another method, this week of cash-only has taught me that I really do think more about what I'm buying when I pay for items with cash. Although I don't feel the need to throw away my plastic (it is, after all, quite convenient in a pinch), this practice is something I would like to continue in the future, perhaps in conjunction with a better-developed budget.