In a world…of credit cards, debit cards, prepaid gift cards, PayPal, and even Bitcoin…is there any room for cash in your wallet?
There’s no doubt that the world is going cashless. It’s so much easier to bring a card or two, make all of your purchases electronically at the store, shift your shopping online, and avoid using cash at all. And, when you think about the fact that one of the founders of PayPal is rich beyond measure and now dabbles in electric cars and space exploration, and Bitcoin actually added to the earnings of Overstock.com last quarter – by the tune of 4 cents a share – then you might think that your Washingtons and Lincolns have no use. Let alone the Benjamins – when’s the last time you actually held a $100 bill, anyway?
The envelope system
Financial gurus like Dave Ramsey LOVE the envelope system. We’ll admit that it takes a little getting used to – change is never easy, after all – but its general premise is this:
- Withdraw all the cash you will need for all of your cash expense categories at the beginning of the month.
- Put each item into an envelope, earmarked as appropriate. “$500 – Groceries. $100 – Entertainment.” Etc.
- Once each category’s envelope is used up, you’re done with that category for the month.
A modern twist on this: set up every recurring expense on an autodebit. As soon as you get the bill in the mail – or it’s posted online – deduct it from your checkbook right then and there.
Meanwhile, using the envelopes of cash is still rather sensible – especially when you are shopping at cash-friendly places like Aldi for your groceries.
Withdraw your “allowance” and only use that
Okay, but…what if you don’t want to go THAT far, and you don’t want to lug cash around in large amounts?
Consider going on an “allowance.” If you work away from home, you should have a general idea of what you’re spending on expenses such as commuting, coffee (let’s be realistic) and lunches out. We had this down to a science at our last contract gig – driving the small, old car (more on that down the road; see what I did there? “Down the road…”) meant that we were looking at $25 a week in gas. (It was a haul out there.) Lunch and coffee at ten bucks a day: guess what, $75 all in.
Sure, it’s easy to be running late and decide that you need a $3.00 coffee from Starbucks. But if you do that every day, your lunches are going to start being smaller and smaller. Plus, the office coffee isn’t THAT bad.
Negotiate a cash discount
This CAN be done all sorts of places. Doctor’s offices? Yeah – they’d rather avoid having to deal with insurance for the routine things. Billing is a pain, submitting to insurance is a pain. And so on, and so forth.
We’ve seen gas stations do this, too: When gas is $3.59 a gallon for credit, but $3.56 a gallon if you pay cash. Take the extra minute, prepay for $40 of gas, and save a little.
Don’t forget about fee avoidance, too – another sort of cash discount. We’ve seen bodegas charge a $0.25 fee for each credit or debit transaction.
Upfront is more valuable
If you work for yourself, managing cash flow is often a challenge. We’ve done quite a bit of contract and project work in the communications, PR and marketing space – you can learn more about that over at Area 224 – and we know all about the squeeze that companies can put the little guy (or gal) under.
One trick – and we’ve used this quite a few times – is to negotiate an “upfront.” This can be done a couple ways, and here’s an example.
Let’s say you’re working for a company and they’re going to pay you $2000 for a six-week web maintenance project. (Is that high? Is that low? It’s all in the details – number of hours, type of work, how often you’ll need to be onsite, etc. Just go with us here…)
It’s not out of the realm to ask for a percentage – 25%? One-third? One-half? – before you do anything. Put that in your contract and stick to it.
What if they balk?
If they say no – “we don’t customarily do that” – but you want (or need) to take on the work, another tactic is to keep your fee as is, but make that the “discounted rate” IF payment is made Net 30. So, using the above example, it’s $2000 if paid in 30 days, but $2500 if paid after that.
The world is going cashless, but…
This doesn’t necessarily mean you shouldn’t. Having some well-planned twenties, tens and fives in your wallet? Never a bad idea.