Does Cash Really Keep You From Overspending

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					            Does Cash Really Keep You From Overspending?

People out there think that by only using cash, shunning credit cards in the process, they
will put themselves in a better position to stay out of debt and control their spending.
They think that simply because cash is a finite resource, they can only spend what they
have available and no more. They also believe that the only form of debt is overextending
themselves with credit and credit cards. Unfortunately for all of these people, that line of
reasoning cannot be further from the truth.

There are a couple of misconceptions when it comes to cash and debt. Both, if taken too
lightly or ignored, can be just as dangerous to a person's financial state as mishandling
credit cards can be.

Cash Is Not Foolproof

The first wrong assumption, and the most dangerous, here is that you cannot get into
financial trouble by adopting a cash-only lifestyle. In fact, this is further from the truth.
Just because you shouldn't be able to spend more money once your balance reach zero
doesn't mean that it is always true. There is a little thing called overdrafting, which is a
common problem among people who have poor money management skills.

For the uninitiated, an overdraft is what ends up happening when you make a purchase
via check or electronic debit and there is not enough money in your account. In some
instances, the bank will process the payment and allow the account to remain overdrawn,
or negative, while charging interest until the balance is brought back to a positive value.
In other instances, the payment is rejected outright. Either way, your bank will charge
you an overdraft fee, and in many cases, they company you paid will also charge you a
fee to cover their own returned deposit charge.

Overdrafting is very easy to do if you do not have a handle on your account balances, or
if you try to play games with floating funds--planning on a deposit coming in but hits the
account after purchases have been made. The best case scenario is that only one payment
bounces. The other end of the spectrum occurs when the one creates a cascading effect on
a series of payments. The end result can be a significant negative balance in addition to a
serious number of returned item fees and fees passed along to you from the companies
you attempted to pay.

Debt Is Not Exclusive to Credit Cards

The first thing people equate with consumer debt is credit card debt. That is far from
where the line is drawn. The reality is that debt means owing anyone anything, monetary
or otherwise. You may be wondering if you only use cash then how can you end up in
debt? It's really quite easy to do.

The answer lies in your spending habits. You're undoubtedly aware that putting more on
credit cards than you can repay is a major cause of debt. But what people tend to ignore is
that even if you don't use credit cards mishandling your money can also lead to debt. You
may go out on a shopping spree, using just your debit card, but wind up spending more
that you originally planned. When it comes time to send in your payments for things such
as housing, auto, phone, power, or any other bill you may not have enough in the bank to
pay one or more of them. What happens next? You become indebted to these companies.
You are now in debt.

The more out of control your spending is, the further behind you get on your bills. Debt is
not exclusive to credit card users, and as you can plainly see here, it is very possible, and
not that difficult, to get into debt even with a cash-only lifestyle.


The information is all there for anyone to see: cash is not as safe as some of the pundits
will have you believe. No matter what the experts and studies say about the psychology
of people's spending habits, no matter how much people will argue that cash makes them
spend less, it is very possible to overextend yourself financially using cash.

				
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