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, IL., 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 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 stock of his finances, and slowly but surely, began paying down debt and increasing 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.” It was difficult, he admitted, but now his goals are all realized. His commitment to living credit-free is not a bad idea.

Statistics on credit

When it comes to credit, almost everyone has it. For example, a recent survey done Hoffman & Brinker showed that as of September 2009, Americans owed $ 917 billion in revolving credit lines. 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. Lacking a plan, a lot of people find themselves in dire straits with their finances. Mortgage loans, car loans and unsecured loans are no longer given out to just any applicant. Before the recession, laws were a bit more lax. Funding was easy to get, and if you had a credit score of any kind, you could find a lender to loan you 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. Particularly because of the way credit lenders took the recession, borrowers saw how unreliable credit can be at times. More consumers are now moving away from traditional funding methods like unsecured loans, mortgage loans and credit cards. They are opting to use cash instead of credit, and take their future in their own hands.