Money Talk Daily

Cash only money management

A recent CNN Money article highlighted people from all over the USA who have switched to cash only transactions to better manage finances. William Hazelgrove of St. Charles, Ill., is tired of mortgage loans, auto loans, unsecured loans and debt. He’s not alone in his sentiment toward credit and debt, but unlike other consumers, he is doing something about it. Hazelgrove had previously dealt with credit like a lot of people had. When he received bills, he’d pay them with his credit card. It wasn’t until his credit company hiked the interest rate due to the recession that he realized the problem. “I realized if I ever wanted to live within my means, I would have to switch to using cash only.”
Hazelgrove took charge of his finances, and steadily paid off debt and increased savings. He took on a second job and channeled the money directly to both. His complete solution included:

• Keeping a debit card balance above $100
• Liquid savings of $5,000 for emergencies
• Using Quicken to keep track of every expense

One of the main commitments he had to subscribe to was not spending when cash was low. He stated, “It was hard, especially towards the end of the month, but I had to forego credit card spending. If I couldn’t afford it, then it had to wait.” He admitted it was hard, but he was able to pursue and achieve his goals. Living without using a lot of credit isn’t exactly a bad idea.

Statistics on credit

When it comes to credit, almost everyone has it. A recent study by Hoffman & Brinker revealed that Americans totaled up to $ 917 billion in credit debt by September 2009. Just about 70 percent of that credit is currently past due.

It’s no secret that consumers over-used their credit, and the harsh reality is that lenders have changed their rules in terms of lending and limits. Without an action plan, many Americans will find themselves at a difficult juncture in their finances. Mortgage loans, car loans and unsecured loans are no longer given out to just any applicant. Prior to the recession lending laws were lax. It was easy to get funding and almost every credit-scored applicant could find some lender to extend money. Granted, the money most likely would come with a hefty interest rate, but for most consumers that was a price they were willing to pay.

Today’s world of cash management

The lending crash had the biggest effect on people going cash-only. Due to the number of defaulting borrowers, credit card companies had to take drastic action to mitigate their losses. They raised interest rates to unmanageable levels and cut limits. Another person, Daphne Harringe of Cincinnati, OH, said, “We always used credit to manage our monthly bills. Always. Then suddenly our interest rate shot up to 27 percent after one delinquency. It was difficult to manage, but we realized that we had to switch to cash if we were going to save our future.”

More and more consumers are heading towards a cash-based money management system. Particularly because of the way credit lenders took the recession, borrowers saw how unreliable credit can be at times. More consumers are moving away from funding methods like credit cards, mortgage loans, and unsecured loans. They are opting for cash as they forge ahead and create their financial futures.