Here’s my system for getting through life without using credit cards.

Cash

–I always have $200 cash on me.  I carry my cash in a money-clip.

Debit Card

–I always have a Debit Card on me.  I carry my Debit Card in my money-clip.  I wrap my cash around my Debit Card.

Checkbook

–I have a checkbook which I keep in my wallet.  I only write about 5 checks per month.  My checkbook usually stays in my glove-box.  If I have to write a check, I will tear a check from the book, fold the check, and put it in my money-clip.

Wallet

–I have a wallet.  I hate to keep it in my pocket, so it usually stays locked in my glove-box.

Credit Card

–I have a credit card that I never use.  It stays in the back slot of my wallet.

In the past 2 years, I’ve only made two purchases which required more than $200 in cash.  On those occasions, I withdrew the cash from the ATM, put the cash in my pocket, made my purchase, and went about my way.

Renting A Car or Reserving A Hotel

–I have rented a car AND reserved a hotel using my debit card.  (I know that some companies require reserving a car with a credit card.  So, if pressed, I could RESERVE the car with my credit card, but PAY the bill with cash.  So far, I have not had to deal with this situation.)  When I checkout or return the car, I pay my bill in cash or use my debit card.

Plane Ticket

–I’ve never flown, so I have no idea how this would work.

On-line Purchase

–I have a secondary checking account with a fixed amount of money.  This account has a debit card.  The account does not allow “over-drafts”.  I use this debit card associated with this account to make on-line purchases.  I’ve never had a problem using a debit card or getting a refund.  I’ve used a debit card to pay for items from Amazon, pay my hosting fees, and manage my satellite radio bill.

Bills

–I use free on-line bill-pay to pay all of my bills.  I’ve never had a problem.  In fact, my local doctor was impressed with the fact that I could use on-line bill-pay to pay my doctor bill.  I actually showed him how to setup an account with his bank!

As you can see, living without a credit card is pretty easy.  I’ve yet to find myself in a situation where I “had” to use a credit card.  I make sure that I keep enough cash “on hand” to meet most situations, but not so much that I’m overly concerned about losing it or having it stolen.  IF someone where to steal my wallet, they’d get a single credit card, my license, and about 10 checks.  If they were to rob me, they’d get about $200 and a debit card.  There are risks associated with every method of carrying money, but I feel pretty secure with the the technique that I use.  If I am travelling, I will, of course, take my wallet out of my glove-box and put it in my back-pocket.  (Wallets are SO 1985!)

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Edit:  For those of you interested in purchasing the envelope system mentioned below, I have created a link to it at the top left-hand side of this page.  It is listed as Executive Envelope System.
If you are going to live without credit cards, you have to learn how to stay on a budget, balance your checkbook, wisely use your debt card, and control cash spending. For the sake of this post, “cash” will refer to actual currency: paper bills and coins!

Several personal finance writers suggest using an “envelope” system for cash management. Here’s how the “envelope” system works:

Withdraw a specific amount of cash from your checking or savings account. Separate the cash according to specific budget categories. Place the cash into individually labeled envelopes and use the cash in those envelopes to purchase items throughout the month. Common envelopes are: Gas, Groceries, Food, Eating Out, Miscellaneous.

If you are brand new to budgeting, I strongly recommend using the envelope system. It works very, very well, and it teaches discipline. Once the money in one envelope runs out, you have a choice to make. You can allocate more money from another envelope OR you can stop spending money for those particular items.

Beyond using the envelope system, here are some techniques that I use to control my cash spending.

1. I limit those “convenience store” purchases that eat up so much cash. $1.39 for a 20 ounce bottled water? I purchase a 24 pack at the grocery store, and then keep them with me in the car. The same thing works for snacks. I purchase walnuts, almonds, and other nuts “in bulk” and keep a small jar of them with me in my car. So, when I want a snack, I don’t have to pay “convenience store” prices.
2. I keep “change jars” in the kitchen, the laundry room, on my dresser. Whenever I empty my pockets, I have a place to put my loose change. Once a month, I gather the change and take it to the bank or use it for my daughter’s allowance. She loves counting coins!
3. I talk to my kids before we go into a restaurant. My kids like to buy those little “prizes” at the front door of most restaurant chains. You know what I’m talking about: fake tattoos, those little bouncy-balls, bubble gum. These things cost twenty-five cents to a dollar a piece! If my kids have earned some money during the week, I will allow them to purchase one of these “fun things”. But, I always reserve the right to say, and I let them know this. I HATE when parents allow their children to beg for these silly things at the checkout.
4. I talk to my wife at night about any cash she might need in the morning. You know how it works. Your wife is going to work, you are going to work, and the kids are going to school or daycare. At the last minute, your wife looks into her purse or you look into your wallet, and the question comes, “Do you have a few dollars?”. My wife and I used to swap the same cash, back and forth, during the month. Have you ever found yourself going through your spouse’s wallet/purse and “borrowing” some money? Of have you ever gotten somewhere and realized that your spouse “borrowed” some money from you? To avoid these headaches, discuss cash needs at night, and get prepared for the next day. A one minute conversation can save a morning of frustration.
5. I think about my purchases. This might sound super-simple, but I find that most people don’t view cash as “real money”. We have become so accustomed to swiping a card or writing a check, that when we get cash we treat it as “bonus money”. Small expenditures add up. I had to learn to be responsible when using $5 and $10 bills. I think about my purchases, and I weigh the immediate benefit versus the long-term consequences. Once I am convinced that the purchase is a quality purchase, I make the purchase and I feel GOOD about the purchase.

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If you’ve been reading my newest blog, No. Calories Needed, the you know that I recently joined a local gym.  (And if you haven’t been reading my newest blog, get to it!  You know you want to!  See if I can do with my fat what I did with my debt.  Get rid of it!)  The gym offers a discount if you sign up for a monthly “bank draft”.  The regular monthly fee is $35.  The discounted fee for a “bank draft” account is $31.  Over the course of a year, that’s a savings of $48, so I signed up for the monthly “bank draft”.  Today, however, while I was checking in at the counter, I noticed that there was an ADDITIONAL sign-up option.  If I prepaid for a year, I could get a monthly rate of $29.  Over the course of a year, that’s an additional savings of $24.  I’ve just run the numbers and I’ve decided to prepay for the year.  Here are the reasons:

1. The obvious reason is the $24 discount.
2. If I put $372 in a savings account ($31 x 12) at 5%, I could make $18.60 in interest in a year.  That amount is LESS than the $24 discount, so the discount is a good deal.  (Plus, the $372 would be reduced every month, and the actual interest earned would be less than $18.60)
3. I don’t particularly like to give access to my checking account.

Of course, if I prepay, I’m STUCK with a solid year of gym membership.  I’m actually using this to my advantage.  I’m so cheap, that I will probably continue to go to the gym for the entire year, if only to “get my money’s worth”.

If you are offered a discount for prepaying, consider the following:

1. Is the discount MORE or LESS than I could earn in interest?
2. Will I actually use the service for the ENTIRE time for which I am paying?
3. Can I get the discount even if I don’t prepay?  (In other words, ask the people offering the service if you can get a discount for using cash, etc.)

Oh yeah, for those of you who were wondering, I will be paying for this membership with money that I made this month from eBay sales.

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I previously discussed the fact that I do not use credit cards. For day to day purchases, I’ve limited myself to three payment options. I use cash, checks, and debit cards. For paying monthly and annual bills, I use online bill pay.
I use cash at the gas station, grocery store, barber shop, dry cleaners, etc. In brief, in any situation where my total is less than $200, I will use cash. I like to actually “feel” the money leave my hand. This process allows me to decide if I really, really want an item, and I have to deal with the immediate consequences of my purchasing decisions.

I use checks to pay for child care, my tithe, house repairs, etc. In brief, in any situation where my total is MORE than $200 dollars, I will use a check. If I am going to spend more than $200 dollars for an “unplanned” expense, I will always discuss the purchase with my wife. We NEVER make major purchases without having a family discussion. Why? Because, it is OUR money, not my money and / or her money.

I use my debit card to pay for online purchases, quick-pay gas stations, and to reserve hotels. In brief, in any situation where a credit card would normally be used, I use a debit card. I only shop at 3 or 4 reputable online business, and my debit card is connected to a secondary checking account that has a limited amount of money. I recognize that the liability limits in place for debit cards are not the same as those in place for credit cards. But, VISA does have a policy of limiting liability. I do not use my debit card very often, and when I do, I closely track my account’s transactions.

I use online bill pay to pay monthly (and annually) reoccurring bills. In brief, I pay my electricity, cable, phone, cell phone, and insurance bills with online bill pay. I have a budget, and I pay my bills at the first of the month.

There you go. That’s how I roll. Debt-free, cash-only, easy-as-pie!

One last thing: I keep all lose change in a box on the kitchen counter, roll it up at the end of the month, and deposit it in my daughter’s Educational Savings Account.

Resource: Simple, Effective, Powerful Budgeting System

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My wife is a thief. I am down 20 more dollars, to a total of 140 dollars, and I never even left the house today. Why? Because, my wife is a thief. She took the money and ran. Police!

No, really, our day-care provider is celebrating her birthday tomorrow, and my wife took 20 bucks to buy her a birthday cake. She provides such good care for our kids, so it is totally worth it. Check out the new chart below. If you are new to the site, welcome, and you can check out the original “Cash-Only” post.

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