The
Power of Cash
By Kelly Cullison
Recognizing the psychological power of cash has
changed this client's way of thinking and helped her realize true,
measurable results in her efforts to eliminate debt. Here's how....
Five months ago, Jennifer* came to me with over
$32,000 in debt. She was barely able to make her monthly minimum
payments, and was charging groceries and other necessities on
her cards. After we reviewed and discussed her situation, she
realized she was at a critical point where failure to take action
would ultimately lead to bankruptcy. Jennifer asked for my help
to eliminate her debt and guide her through the budgeting process.
Today, just 5 months later, Jennifer has made
tremendous progress:
- She has not placed ANY more charges on her credit cards.
- She has created and continues to live within a budget, which
we monitor weekly.
- With the help of a debt reduction plan, she has reduced her
debt by 9%, to just over $29,000. She will be completely debt
free in 3.6 years.
- She feels a sense of relief whenever unexpected expenses occur,
since we've managed to set aside an emergency fund.
Before Jennifer could realize any success with
her debt reduction plan, she had to get her current spending under
control. A key part of Jennifer's success lies in recognizing
the power of cash. Jennifer had become accustomed to paying for
everything with plastic or by check. When we created her budget,
we built in a weekly" allowance." Jennifer's allowance
covers all recurring expenses that are not regular bills: groceries,
gas, entertainment, etc. (Healthcare, car maintenance, and other
irregular expenses are covered by her emergency fund.)
Jennifer takes her cash allowance out of the
bank each week. She knows that when the cash is gone, she will
have to wait until her next "allowance day" before she
will have more. She can visually monitor what's left in a way
she never could with credit cards or checks. She thinks harder
about each purchase because she has to hand over good 'ole U.S.
currency.
In our digital age, we've become desensitized
to the value of money. Money has been reduced to figures on an
ATM screen, or a balance on a credit card statement. We've lost
touch with CASH. By recognizing the psychological power of currency
and implementing an allowance system, Jennifer has been able to
stay within her monthly budget and make tremendous progress.
TAKE ACTION
Try the allowance approach for 1 month. Follow
these steps:
1. Pick a day of the week for your allowance
day. Consider your spending habits. If you usually spend a lot
on the weekends, you may prefer an allowance day early in the
week so you don't run out of cash too soon.
2. Review your monthly budget.
3. Identify all of the items that are recurring,
such as food, entertainment, haircuts, etc. Ignore bills, such
as power, rent, and phone.
4. Add up the items you identified above. This
is your total allowance for the month.
5. Divide by the number of allowance days in
the month. If your allowance day will be Monday, divide by the
number of Mondays. This is your weekly allowance.
6. Take your weekly allowance out of the bank
each allowance day. Don't go back for more until the next allowance
day.
* Name has been changed, of course.
ABOUT THE AUTHOR: Kelly Cullison helps consumers
eliminate large debt balances without debt consolidation, credit
counseling or bankruptcy. Visit http://www.kc-solutions.net
to find out how.
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