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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My cash-free life

So, I’m traveling Friday, and of course I have a list of to-dos before I leave…plans for work, plans for packing, plans for a few things I’m taking care of around the house. The most important thing on my list? Now don’t laugh…this is a reflection of my cash-free lifestyle…I have to stop at an ATM and get cash for the airport ferry.

Airport ferry you say? What’s that about? Well, some very clever engineers, way back in the 70s, decided to build Ketchikan’s commercial airport…on a different island. Yep, that’s right, the ONLY available location for an airport that was feasible in this area had to be on a separate strip of land, across the Tongass Narrows that separates the island Ketchikan is on from the island home of the local airport. And how do you reach the airport? Is there a bridge? NO, there is not. If you recall the infamous “bridge to nowhere” issue from the last presidential election, that was about Ketchikan. No bridge across to the airport, but the local government graciously runs a small ferry that crosses twice an hour, for the small sum of $5 per person if you walk on. If you drive across, the fee is higher.

Now aside from the irritant that I have to back up my time to leave to include the ferry schedule, which is annoying in itself, the ferry operates on a CASH ONLY basis. How is that possible in this day and age? I don’t keep cash, don’t use cash, literally go for months, unless I travel out of town by myself, without seeing so much as a nickel, much less a dollar. The fact that I have to obtain cash to get to the airport is a special irritant to me. This isn’t about the $5 fee, which seems reasonable enough. It’s about the fact that it has to be paid in cash.

I keep a $100 bill in my purse, an emergency-only fund. But if I break it, that defeats the purpose of it being for emergencies only. Because then it would only be a matter of time before it would be nickled and dimed away, on this, that, or whatever. I learned a long time ago, before the earth’s crust cooled and when I had small children who loved happy meals, (and before fast food chains accepted credit cards) that if I didn’t have cash on me, I could be firm and say, “not today, Mommy doesn’t have any money.” And they didn’t know I could have gotten money. It was an effective way to keep us out of fast food restaurants, and to keep money from flowing out of my veins.

But wait, you say, you don’t have to actually be cashless to resist spending money. Well, that’s true, and being cashless doesn’t mean I don’t spend. Of course not. But it helps me be thoughtful about what I spend, and how I spend. One of my personal spending guidelines is that I don’t buy anything on a credit card for less than $5…that just seems unfair to the merchant, who has to pay a fee for credit card usage. For small expenditures like a Starbucks coffee, I buy a Starbucks gift card so I don’t have to pay in cash or ask the merchant to pay a fee for a very small credit card charge. Tips for meals or services go on my card, and there is really nothing that I buy, no where that I shop, that I can’t pay with my VISA.

The benefit to me, besides giving me an almost complete history of my spending habits and actual expenses, is that I use a card that gives me airline miles. And I use those miles. I pay the balance each month, so I’m not in credit card debt, and I make the card work for me. I figure, if I’m buying a gallon of milk, I’m flying on that milk. Or someone is. It’s a way to get a little more bang for my buck, and when you live in Alaska, flying becomes an important part of life.

I use direct deposit for my salary. I get a digital copy of my pay stub. I write a few checks each month, primarily for charitable contributions, with an occasional check written on a health savings account for routine care. But that’s it. Everything else is paid through my credit card. Except the airport ferry. They got me, and I can’t fight city hall. What would happen if I forgot to have cash on hand? Well, if I’m with Rob, not a problem. He seldom uses cash, but he always has cash. And if I’m not with him? Well, I might be stranded. You pay the ferry fee after you ride across to the airport island, but before you enter the airport…a real no man’s land. No ATM, no credit or debit cards accepted, and nothing but a grouchy woman in the booth to say, “Sorry, but rules are rules!” No, I’ve never gotten caught in the ferry wilderness…but I wonder what happens to poor souls who do. They’re probably still wandering about on the airport side, looking for a friendly face, an ATM, a five dollar bill on the ground.

And I wonder…how many people out there are like me, going through life without seeing, touching, or using real money on a regular basis? Sometimes I read about saving for purchases by emptying your change into a jar, and that amazes me. Do people really still have change every day? And why? I’ve lived this way so long, I’m not sure if I’m in the mainstream or an oddity.