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, from St. Charles, IL., is tired of mortgage loans, auto loans, unsecured loans and debt. He isn’t alone in his sentiment – but unlike a lot of people, he’s doing something about it. In the past Hazelgrove and his family dealt with credit much like most people did. When he received bills, he’d pay them with his credit card. It wasn’t until the credit card company egregiously raised the interest rates due to the recession when 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 got a second job, and put the funds right into 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 said, “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.” It was difficult, he admitted, but now his goals are all realized. 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. Almost 70 percent of that credit debt is past due.

It’s not exactly classified information that a lot of people used too much credit, and the truth is that lenders changed 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, that money often came with a hefty interest rates, but many people were willing to pay the price.

Today’s world of cash management

The lending crash had the biggest effect on people going cash-only. Because of the huge number of defaulting borrowers, credit card companies decided to take drastic action in an effort to mitigate their losses. They raised their interest rates to where they were unmanageable, and then cut limits. One consumer, Daphne Harringe of Cincinnati, Ohio, 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. In particular because of the way credit lenders handled the recession, borrowers realized how unreliable credit can be. More consumers are moving away from funding methods like credit cards, mortgage loans, and unsecured loans. They are opting to use cash instead of credit, and take their future in their own hands.

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