Til Debt Do us Part

[DAYDREAMER]

DW and I have been watching 'Til Debt do us Part' on CNBC. We consider ourselves financially responsible and have our way of budgeting (which is basically mental calculations), but find the budgeting methods on the show to be very intriguing. Gail (the financial helper) puts people on a strict cash budget, cutting up all debit and credit cards, and challenges the poeple to spend within their alotted cash budget. She splits the cash into jars with specific catagories. Now, I know the basics of budgeting, but this CASH ONLY system with little to no access to your bank accounts would definitly force sticking to your budget. Debit cards make it way to easy to spend beyond your estimated budget.

We are going to give this system a try, just to see if we could actually stick to a strict budget. We will freeze our debit and credit cards in a block of ice to slow down the chance of accessing the accounts.

Anybody else have interesting ways of sticking to strict budgets?

 

[Darryl]

No tricks here. If you crash it in week one just dust yourself off pick up your bike and try it again. If both of you work together on this and make it work you are onto one of the most powerful wealth building tools available.
On average people using credit cards spend 10-20% more than people using cash wouldn't surprise me to hear debit card spend is also higher than cash.
Love your block of ice strategy.

 

[Sue J]

I've been watching her show for a while now and while she can be a bit "in your face" with some of these couples she gets her point across and they really do learn how to do it her way. I'm always amazed at how many people are just plain unconscious when it come to their spending vs. their income.

Between Gail, Suze Orman, and Dave Ramsey there seems to be a never ending supply of people in deeper and deeper trouble with money.

 

[Bimmerbill]

Sounds like Dave Ramsey for sure. I "sort of" did the Dave Ramsey thing. Tho I still use my credit card and debit card. I just pay them off. I don't think I could do a strict budget and be happy. Instead, I've paid off all consumer debt and am increasing my savings rate.

Now I just need to stay away from car dealerships...

 

[Texas Proud]

One of the problems with the cash only method is you do not get your 'cash back'... and at 5% for groceries, gas and drugs, that can add up to some $$$s.... probably $600 a year just for those...


SOOO, I finally got my wife on something similar... I put the 'money' in an envelope and said 'this is all you have... when you spend money, move it to the spent envelope'.... she started a couple of months ago and we are still refining it... our 'money' is monopoly money, so we do not have the cash hanging around...

For me it is easy to know what I spend money on and how much I have spent...

 

[headingout]

We've always lived on a budget, always lived below our means, and always used credit/debit cards extensively. I can't imagine participating in the modern economy with only cash. How do you buy online, reserve a car or hotel room? Anyway we could count on one hand the number of months we didn't pay off our balance in 20+ years of marriage. But I agree a strict cash budget is useful, where practical. We implemented it with an "eating out purse" that lives in the car. Our monthly budget for dining out goes in there as cash and when it runs out, we try to eat at home until the 1st. Works for us, and cuts down on credit card receipts I must track.

 

[walkinwood]

I'm with headingout. I would find dealing strictly in cash too inconvenient.

We find it easy to keep to our overall budget while using credit cards that we pay up each month. We don't set budgets for each category - just an overall one for how much we can spend in a year. Keeping track of Year-to-date and last 12 months helps us know where we stand.

 

[DAYDREAMER]

I am in total aggreement with the inconvenience factor, but, that is kind of the attraction to the method. Currently when we go shopping for food, we have a mental calculation of what we will spend, but if the bill goes over by $20 to $30 of your estimate, the debit card is flopped down and paid. Now, if you had to pay in cash, you would not want to go over by $20 or $30, because it would be rather embarrasing at the checkstand.

What I am intrigued about the show is, it would be very difficult to hold ourselves to a "STRICT" cash budget. DW and I are going to challenge ourselves into doing it for a month and see the pitfalls.

 

[youbet]

We've always lived on a budget, always lived below our means, and always used credit/debit cards extensively. .

Not to change the subject...... But why do you ever use a debit card as long as you have a credit card?

 

[Gone4Good]

Gail (the financial helper) puts people on a strict cash budget, cutting up all debit and credit cards, and challenges the poeple to spend within their alotted cash budget. She splits the cash into jars with specific catagories.

I can see how this strategy is helpful to people who have problems controlling their spending, but for us it would mean forgoing ~$500-$600 / year in cash back rewards from our credit cards. That makes it a kind of an expensive way to budget.

 

[Alan]

There are many tools in the "financial toolkit" and using cash only is one of them. I definitely think it is a good tool to use if you are having problems LBYM'ing and have seen it advocated many times, plus seen or heard quite a few folks interviewed who have switched to it and say it was the one thing that got them back on track.

DS and DD got rid of their credit cards years ago and only use debit cards. I think the advantage they find is that there are no bills to pay or forget to pay at the end of the month. Before they hand over the card they make sure they have enough money in the bank to pay.

 

[W2R]

I love that show on CNBC!! Perhaps I just like to revel in someone else's financial disaster, not a very good trait for me to admit to, but hopefully the reason I like it is that in the end, the debtors always manage to gain control of their spending and find Nirvana of some sort.

I don't use credit cards. That is my choice (having lived with them and without them for significant periods of my life), but I recognize and accept that it may not be the best choice for everyone. I don't use jars.

I think that for those who do like having credit cards and yet want to try a cash-only program with jars like that, there would be no reason why you couldn't gradually re-introduce a credit card at some point. You could put the money to pay it off aside as it is spent. "Let's see - - I just bought a $37 sweater with my credit card, so I will take $37 from my clothing jar and put it in the pay-off-the-credit-card jar."

The families being helped on that show have catastrophically serious overspending problems. Their spending problems are so severe that they are probably incapable of dealing with a credit card at all, at first. I don't think that many/any of us here are in quite such dire straits. Again, a lot of these decisions involve deciding what would work for YOU and what you can stick with.

 

[Moemg]

I think most of us have an automatic stop spending built in our psyches . The people on that show seem to be missing that gene . I wonder if they visit them later if they are still okay or have returned to their spending sprees .

 

[Sea Kayaker]

That show has been airing for years here in Canada... along with Pam Anderson, one of our better recent exports.

I have to admit, watching that show makes me feel very good about my own finanical status. And as much as DW and I subscribe to LBYM we could never bring ourselves to live out of "jars of cash".

 

[Alan]

I think most of us have an automatic stop spending built in our psyches . The people on that show seem to be missing that gene . I wonder if they visit them later if they are still okay or have returned to their spending sprees .

Yes, a bit like going on a diet to lose weight and then slipping back into old habits once a goal has been achieved.

I know that my sister and her husband went through this boom and bust with credit cards fairly regularly, then about 5 years ago decided to shred their cards and it has been worked great for them since then. (We talked about it again in December when I was visiting as Christmas was always the worst time for them running up the CC's, whereas nowadays they save up for Christmas).

 

[Walt34]

I suppose everyone has their own way of dealing with keeping track of expenses.

Fortunately I am married to a bookkeeper who keeps a spreadsheet into which we note every credit card charge and keep a running total so there are no surprises when the bills come in.

When the total of outstanding charges gets to a certain point purchasing stops unless it's something that can't be put off, like replacing a water heater.

That works for us, others might find it onerous.

But we do agree that paying cc interest charges for the sake of immediate gratification is, to put it mildly, unwise.

 

[lilly]

I have a general idea of what I spend in certain categories, but I do not track it down to the penny. What I do track closely is my yearly percent saved in my 401K, Roth and Taxable account. In a backwards way this tells me what I have spent.

 

[Katsmeow]

I think that for those who do like having credit cards and yet want to try a cash-only program with jars like that, there would be no reason why you couldn't gradually re-introduce a credit card at some point. You could put the money to pay it off aside as it is spent. "Let's see - - I just bought a $37 sweater with my credit card, so I will take $37 from my clothing jar and put it in the pay-off-the-credit-card jar."

We paid off 6 figure credit card debt without ever quitting using credit cards or going to cash only.

We did however use a variation of the above.

We picked one credit card (Amex Blue cash - well actually had a mastercard for places that didn't take Amex) and used it for all our daily spending for the cash back.
We did however make a real effort to transfer the money we spent from our checking account to savings so we knew we had spent it and weren't spending money we didn't have. This ended up working very well for us.

 

[Bimmerbill]

One of the arguments against credit cards is some study that shows you spend 17% (I think) more with a credit card because its easy, and not "real" money.

 

[scrabbler1]

I rarely use my credit card or my debit card.

I use my credit card for the rare large purchase or for things I can't use cash to buy such as rental cars, hotel stays, or online stuff. This amounts to 5-10 times a year, so there are many months I receive no CC bill. I have always paid off my CC bill in full every month I have a bill.

I will use my debit card for small purchases (under $50) in which I don't happen to have enough cash with me at the time, or if I need the cash for something else later which is cash-only. This happens once or twice a year.

I have no interest in any of those cash-back things. To me, every time I use the plastic is one more chance to have the card # stolen by someone else. Maybe I am just paranoid but it is rare to have more than a week go by without some story about someone or something misusing/stealing a card # and running up a bill.

Other than the supermarket, I often go 1-2 weeks without any chance to use my CC or debit card. (My evening dancing is cash only.)

 

[skyvue]

I watch this show plus Dave Ramsey every night and Suze Orman every Saturday night. I long ago gave up on credit cards and carry no debt other than my mortgage but I still enjoy watching the shows. As others have said, I get some sort of sick pleasure out of seeing how poorly others are doing compared to me when it comes to money.

I use Dave Ramsey's envelope system and pay cash for everything except gasoline for my car and the occasional things I buy on the internet (used debit card for those). I take $280 cash out of the ATM each Monday morning and put into one of 6 envelopes.

Mine is distributed like this:
$60 groceries,
$35 parking/haircuts/dry cleaning,
$60 vacation,
$20 gifts for others,
$25 shopping (clothes or other consumer goods),
$80 entertainment/all else (eating out, drinking, movies, sodas, snacks, etc....).


I am amazed at how clueless the people on these shows are about money. Although I have friends and family just like them. I even recently broke up with a girl friend primarily because she had debt and showed no ability to control her spending (and expected me to pay for all entertainment).

 

[Danmar]

We use our credit cards for as much as we can. Objective is to collect frequent flier miles. Just booked 2 business class tickets to far east for virtually free. Get at least 6-10 flights per year this way. Key of course is to always and I mean ALWAYS pay the balance each month. Hardly ever use debit card. We view credit card interest as a tax on the weak and stupid. By using frequent flier points this way we divert some of this tax to us. Life is good.

 

[Onward]

We use our credit cards for as much as we can.

I do the same thing, for the convenience and the rewards. I do wonder whether the convenience of it encourages me to spend a bit more than I would on a strictly cash basis, though. I find this is a really hard thing to measure.

 

[skyvue]

I do the same thing, for the convenience and the rewards. I do wonder whether the convenience of it encourages me to spend a bit more than I would on a strictly cash basis, though. I find this is a really hard thing to measure.

Even if you pay off your bill each month, study after study have proven that people spend more money when using a credit card instead of cash. Most studies show you spend 10-20% more using plastic.

 

[accountingsucks]

I do enjoy this show. I live in Caanda so have seen many more episodes than what has aired on CNBC. I am amazed that people are just so stupid about their money. Putting money into jars....LOL. Use Excel or simple pen and paper and simply track everything for a few months and then cut where you can. The IQ of these morons will never allow them to manage their money properly.