Cash-free by design – how to do it

So, I’ve had a few people ask me if I really live cash free. And the answer is, almost. There are literally months that go by when I don’t touch real money, the most commonly recurring exception being the $5 fare for the airport ferry that I complained about a few weeks ago.
 
The follow up question is, how do you do it? Well, maybe the first question to ask yourself is, does it matter to you? If it doesn’t, if you’re one of those individuals who pays cash for everything, or has a hybrid approach of using cash, credit cards, debit cards, and checks…well, as long as your choices are working for you, great.
 
But if you’re curious about living a cash-free lifestyle, read on. I’ll give you my game plan.
 
First, as I said in a previous post (repeated here in case you’re not a regular reader of this fascinating and clever blog!), the primary reason I choose to be cash free is for the benefits I gain from savvy credit card use, and for the convenience of having virtually every purchase recorded, tracked, verified, and paid through one source. Now don’t go all Dave Ramsey on me, this ONLY works if you are disciplined and pay attention to your money. If you can’t pay your monthly balance IN FULL every month that rolls around, or if you don’t keep up with what you spend throughout the month, this will not be a good thing in your life, and you’ll find yourself going into credit card debt. I would never encourage anyone to do that.
 
Second, I truly feel more in control with a credit card than I do with cash. I know that is exactly opposite the general belief of many financial planners, but I am not good at managing cash. It just slips through my fingers. So I would not want my financial management to be cash-based. If I have to think about paying with a credit card, I am less impulsive. Avoiding cash helps me refrain from small purchases that add up for my money flow, as well as my diet, as food and coffee/soda purchases would be the primary way I would fritter cash away if I used it. Not that I don’t eat out, or have a coffee stop now and then, but when I do, I pay with my card, or my coffee card.
 
My salary is direct-deposited to my bank, and I also have a couple of recurring payments debited from my bank, so even though a few things are not funneled through my credit card, neither do I have to write checks for these bills each month. But most of my monthly charges are billed to my card. When I pay my utility bill, or my fuel oil bill, when I used to pay college tuition, it all went on my card. Groceries go on my card. Haircuts and professional fees go on my card. I accumulate miles for the money I spend, and I find that to be the most useful payback in terms of credit card rewards. But that’s important to me because I live in a place that requires flying in and out (unless you have enough time to take a much slower ferry). And I sometimes use my miles to have family come up to visit. I like the flexibility of use I get with the mileage benefit. But for some, one of the cash back cards might be a better option.
 
So, I never have to cash or deposit my check, and other than a few checks I write for charitable organizations, everything else is either automatically debited or paid by swipe.
 
One of the things that I watch is the billing cycle each month. If I have a large purchase coming up, I sometimes purchase right after the card has cycled. It give me the full benefit of the next billing cycle to pay. One of my rules is that I can’t exceed in my monthly payments what I am able to pay in any given month. The goal is to NEVER have to take money from savings to pay monthly expenses. So in effect, my monthly income is my budget number each month. That number has to include transfers to savings, payments that are debited from my checking account, and the total amount due to my credit card for the month.
 
Other strategies for management by credit card: check your online balance often. I don’t check mine daily, although if I’m out of town and spending freely, I tend to check more frequently just to verify that charges are added appropriately. I also keep a list of my charges each month in my planner, and I log these at the end of the day when I review any receipts I have in my purse. It’s another way to insure that I don’t lose track of what I’m spending. It also gives me a back up tally in case I can’t access my digital account. My mom debits what she charges on her credit card from her check book register as she charges, so that she’s already debited the amount from her account (on paper). Using that system, when it’s time to make your monthly payment, you’re already reconciled with your checking account, albeit in incremental amounts. You just have to make your online payment for the full sum due.
 
I have one primary credit card that I use, so I don’t dilute my mile accumulation factor, and also to keep life simple. One card to charge with, one to keep track of, one to pay. I do have a couple of back up cards just in case I lose my primary card, or in case of theft. I don’t want to be without options if life happens on the way to the grocery. But about the only time I use a different card (since I’ve experienced neither loss nor theft) is at a big box store that prefers American Express to Visa.
 
If you have concerns about online banking, let me say that I’ve been doing it for years now, and I have not had a bad experience yet. I use my credit card company’s bill pay service to make my monthly payment digitally, and it works like a charm. I particularly like that I can pay it when I want (as long as it is by the date required to avoid interest). So if I choose to pay early, pay twice a month, schedule a payment to occur when I’m traveling, it’s like clockwork. I find it particularly helpful as mail in Alaska can sometimes be unpredictable. Mail goes out and comes in, but if you’re dependent on getting an actual check to a physical location in the lower 48, you may have late charges if you’ve run close to the due date. No offense to the post office intended, but length of delivery times can be variable from this state.
 
So, think about your financial strategy with regard to monthly expenses. I’d be interested to hear what others have found works for them. This is pretty simple for me, and these days, simple, digital, convenient…that’s what I want.

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One thought on “Cash-free by design – how to do it

  1. Very interesting! I have one credit card that gives me frequent flier miles. I use it for regular things that I would spend $$ on anyways, like groceries & gas. When I get home, I make an e-payment to pay what I “charged.” I don’t carry a balance and I’m flying up to Canada to see my mom for $68 — would be >$800 normally (small airport, not many carriers, not much competition = no seat sales. ever).

    You make some great points. I think the smartest one is don’t charge what you can’t pay *(and I’ve learned that the hard way!)

    Great post! MJ

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