Using cash hurts, and that’s a good thing
Summer’s coming, so you’ve lifted your morning exercise game. You go for a run (well, it’s more of a fast walk…let’s be honest). Your wallet is too bulky to bring along, but you’re keen for a coffee on the way back. Maybe a yoghurt and granola cup too. Oh, and maybe a juice. No worries, a quick tap of your watch to pay and off you go. Soooo convenient.
We all tap away – a coffee here, lunch there, a pair of shoes (they were on sale, so it’s fiiinnnnneee) … it doesn’t even feel like real money. And therein lies the problem.
If you’re keen to be a better saver, it may be time to BRING BACK THE PAIN of spending.
What does that mean exactly?
Psychologist have been studying the pain of spending for decades and it turns out, the method you use to pay for things actually influences how much you spend and how you feel about what you buy. Cash “hurts” more than credit cards. There’s a big psychological difference between tap-and-go and handing over actual cash to a shop assistant.
Using cash when shopping brings back the pain of spending. It makes it real. It’s tangible. And since it hurts, you think twice before you buy.
By using your credit card, you’re essentially creating a buffer zone between what you buy and the loss of your hard earned dollars. It inadvertently encourages us to spend more, so it’s pretty obvious that those who benefit from us overspending (ahem..credit card companies…) are quite happy to keep moving towards a cashless society.
But as we use our wearables and phones to make payments, and as we buy more stuff online, we are more and more disconnected from the “spending pain” of our purchases.
But carrying cash is annoying
Yes. There is trade-off between convenience and working on your savings habits. Using your watch, your phone or your credit card is super easy, but it also increases your likelihood of an impulse buy.
On the plus side, a recent study has shown you’re more likely to enjoy and appreciate your purchase if you’ve paid with cash. The more painful the purchase, the more we are emotionally attached to it.
If parting with the plastic is too much to bear, there is another way. If you restrict your plastic payments to a debit card, you may be able to set up mobile alerts that display your balance each time you pay for something. That way, you’re forced to watch your hard-earned bank balance slip away with each payment, and that might help you to form better habits.