Cash, Checks or Credit Cards

[education]

I am curious as to what members of this board think about expenses and how to track them and keep them under control. I guess I read too much. Some authors say keep away from the plastic as it gives you a false sense of sufficiency. Others say use cash only and track it scrupulously. Still others say the checking account is a sure fire way to keep a handle on expenses.

I tend to use a credit card and pay it in full each month. I use bill pay to write the check and save my $.39. I guess I have the brains to know when to say "enough" and not get myself into a credit card trap of paying the minimum while racking up userous charges. I used to use checks a lot, but find they are a hassle. And I'm out of the notion to carry cash as I'm getting to a point where I'm afraid I might lose it while doing a transaction.

Keeping track of exenses and keeping my consumption in check are important as I move to the fixed income mode. What do you guys do to achieve this?

Professor

 

[Khan]

Credit Cards for all online (paid online)

Debit card for most local (balance checked online everyday)

Cash for Farmers Market, small amounts at local

Checks for rare occasions (property tax, plumber, folks that do house cleaning and yard work, when have insufficient cash for Farmers Market)

 

[OkieTexan]

I use online banking and find the tools available for analysis quite helpful.

1. I write 2 to 4 checks a month.
2. Most bills I pay online.
3. Each month I export the data to Excel and divide my expenses into categories
4. I have the data for 2004, 2005 and 2006 set up the same way; so I can make
a relatively accurate comparison.
5. On another sheet, I annualize everything and make a few adjustments (ie. Suppose I get reimbursed for something) and add it all up!

 

[LOL!]

Cash-back or FF credit card for everything. I don't use cash even for a 50 cent pack of gum; don't use an ATM; don't write checks.

It may be helpful to use a specific card for specific expenses like groceries and gas (get the 5% cash-back). Or a different card for restaurants. That way you can see instantly with the monthly bill your big spending categories. You don't need Excel or Quicken of MSMoney if you do it this way (but it's OK to use them).

And of course pay CC bills in-full every month will your free online bill pay.

 

[Goonie]

I do ALL my banking online (except for withdrawing cash).

I pay almost all my bills online.

Investments are mostly automatic EFT.

For day-to-day purchases, and online shopping, I use a Visa linked to my checking acct.

For vacations and major purchases, I use a MC with rewards, then pay it off immediately the day the monthly statement posts online.

I normally write less than 6 checks per YEAR!!! (I hate checks...they're a pain)

I go to the bank about once a month to grab a little cash to pay for stuff like my morning cup of joe.

BTW....my paycheck is direct deposited....and in 131 days my pension check will be also!!!

If they would only come up with a (legal) way for me to print my own money, I would never have to hit the bank!!! Of course, I would then miss out on the FREE coffee there!!!

Oh, and tracking....I use a ledger book and a pen!!! 8)

 

[Bob_Smith]

I am curious as to what members of this board think about expenses and how to track them and keep them under control.

Professor, regarding the tracking of expenses: I track expenses with Quicken. Everything we spend gets noted at the time (whether in the check registry or the VISA registry). At the end of the month, I download the transactions and assign each transaction to a category. Every few months I call up a report to see where the money is going. I think that was helpful in the early years. Now I'm not so sure. We've been doing it for so long that we seldom learn anything from it, and I can't recall the last time we actually changed the way we did things based on spending patterns. But I keep doing it - primarily to compare spending from one year to the next.

Regarding methods to keep expenses under control: We pretty much rely on habit. I never made a big salary; a little more than a public school teacher, but not much more. So reigning in our spending was the only path to FI for us. It has become automatic. That being said, we also allowed for a higher standard of living in retirement. For us this was somewhat of a psychological twist to retirement planning. By slightly ramping up our standard of living after retirement, and actually building that into the plan, we attempt to avoid the issue of becoming so averse to spending, and so focused on saving, that we unnecessarily restrict ourselves in retirement. If it becomes necessary we know how to enjoy life on the cheap... we'll get through it. But after quite a few years of planning for this, we also ran the risk of becoming so averse to spending as to create regrets later. There are two sides to that coin, and for some of us, it's probably not a bad idea to plan for both. There's a tendency (understandably) to spend most of our time planning for worst case scenarios, but most don't actually encounter them.

Some authors say keep away from the plastic as it gives you a false sense of sufficiency. Others say use cash only and track it scrupulously. Still others say the checking account is a sure fire way to keep a handle on expenses.

I don't think it makes a whit of difference. It's the mindset you carry that matters - not what you carry in your pocket.

 

[Nords]

Professor, regarding the tracking of expenses: I track expenses with Quicken. Everything we spend gets noted at the time (whether in the check registry or the VISA registry).
Every few months I call up a report to see where the money is going. I think that was helpful in the early years. Now I'm not so sure. We've been doing it for so long that we seldom learn anything from it, and I can't recall the last time we actually changed the way we did things based on spending patterns. But I keep doing it - primarily to compare spending from one year to the next.

Same here-- everything's in Quicken since 1992.

We used to look at our spending monthly. This year that's tailed off to semi-annually. However we still track everything in Quicken to answer questions ("When did we buy this piece of crap electronics?!?") or to predict the next purchase.

We pretty much rely on habit.
By slightly ramping up our standard of living after retirement, and actually building that into the plan, we attempt to avoid the issue of becoming so averse to spending, and so focused on saving, that we unnecessarily restrict ourselves in retirement. If it becomes necessary we know how to enjoy life on the cheap... we'll get through it. But after quite a few years of planning for this, we also ran the risk of becoming so averse to spending as to create regrets later.

Same here again.

We've been loosening up on those $10-$20 occasional purchases while throttling down the monthly expenses and the insurance bills. Spouse has been seriously upgrading the home décor (new kitchen counter, new master bedroom carpeting) while I've been buying tae kwon do gear, home improvement supplies, and even more books from Amazon. OTOH we still struggle with how much could be donated to which charity and we don't really have enough of a clue to form a plan.

My parents in law are extremely expense-averse to the point of spending a quarter in pursuit of a dime. They don't appear to analyze their behavior but instead seem to work from an ingrained habit of what a dollar's worth-- in 1952. They've had the same livingroom furniture since 1958 and today are engaged in ridiculous attempts to keep it in showroom shape. We're trying to break out of that mold.

I not only have spouse's permission to shove her head in a toilet if she gets too old to recognize that she's too old-- I have permission to do it if she turns into either of her parents...

 

[Patrick]

I not only have spouse's permission to shove her head in a toilet if she gets too old to recognize that she's too old-- I have permission to do it if she turns into either of her parents...

And does she have permission if you do?

 

[audreyh1]

Use on-line bill paying.

Use credit card for everything else. Pay off credit card every month.

Use Quicken to track everything. Download bank and credit card purchases often. It's easy to see monthly expenses. Quicken even lets you track against a budget and see how you are doing.

Audrey

 

[bruce1]

I have a thought for those of you who keep next to no cash on hand. A few years ago there was a major power failure in my area and all debit and cash machines were out. The hardware store had flashlight batteries, a local gas station had back up power for their pumps but after both ran out of the few credit card slips they kept on hand all purchases were strictly cash. I rarely have less than $100 in my wallet and I have $500 in small bills in three locations on my property. The same thing seesm to happen with all emergencies, there are goods to buy but cash is King.

Bruce

 

[LOL!]

I've been through several power failures and a couple of hurricanes without cash on hand. I have found there is no need for cash on hand for me. One should've already bought emergency supplies well before any disaster.

There may be a need to have a drivable motor vehicle with gas in the tank, but no need for cash on hand.

Of course, if it makes you comfortable stash some cash. But I recall a couple of Katrina news stories where some New Orleans residents claimed they lost $2000 in hidden cash when their homes burned to the ground.

 

[mathjak107]

after 9/11 here in nyc many atm's were down for days in our area as well as credit card links. cash was king for a few days

 

[rmark]

Credit card for online and out of town use.
Debit card in town.
Checks for a few bills.

 

[bpp]

I use cash for everything, unless it costs more than a few hundred dollars. I only use credit cards for big purchases, or if I am visiting a country where I don't feel comfortable carrying cash, like the US -- and even there I use cash for anything under ~$100, so that I don't risk getting the card number skimmed over something trivial like dinner. Haven't written a check in years. Utilities, etc., are all handled by automatic monthly debits.

For budgeting, every now and then I will save and categorize all receipts for a month if I don't feel like I am sticking to my desired budget, but for the most part I just keep a running tally of ATM withdrawals to see whether I am on track for the month or not.

 

[d]

i use credit cards for most everything (keep a running balance in my "check" register); write a few checks every month; and use cash infrequently (purchases <$5).

 

[mickeyd]

Cash? What is cash? Oh yea, we pay our domestic help with that stuff I believe.

We pay for 99% of our purchases via CC. 1% DC.

We pay off CC each month.

We use online banking about 90+% of the time. (Exception is when I have to include a check with a form to mail or submit i.e. $67 to apply for passport from the Department of State.

Still using checks that have ________, 19____. This supply should last a few more years as I think that I have about 25 more checks and only write about 6 checks/year.

I reconcile checking account each month. If I'm close, I give the benefit of the doubt to them, adjust my balance, and I'm off to other things. Takes about 5 minutes/month. I use a little Excel program that I devised years ago. Keeping it very simple.

 

[Nords]

And does she have permission if you do?

Uhm, no. I have a feeling that I'll be one of those persistent strugglers who won't give up for a while.

I sure hope she's not emptying my bedpans. Stephen Hawking just lost spouse #2 that way...

I've been through several power failures and a couple of hurricanes without cash on hand. I have found there is no need for cash on hand for me. One should've already bought emergency supplies well before any disaster.

Exactly-- it's part of our "two days before the hurricane hits" checklist.

 

[donheff]

I use credit cards for everything I can. They all award frequent flyer miles. And I always pay them off in full. Checks get processed by the bank's online checking so I pay no postage. Cash is for small stuff - generally no more than a few dollars.

 

[Cut-Throat]

I use credit cards for everything I can. They all award frequent flyer miles. And I always pay them off in full. Checks get processed by the bank's online checking so I pay no postage. Cash is for small stuff - generally no more than a few dollars.

Pretty much the same here. Except I don't write any checks any more. I have auto withdraw set up for all reccurring bills or Credit card (if they don't charge a fee). I only write a check if I'm forced to. Maybe 1 every 6 months or so.