“Just because everything is different doesn’t mean anything has changed.” — Irene Peter

DollarsMy oldest sister has been married almost twenty years. She brought to the marriage a considerable amount of credit card debt and her husband helped chip away at these balances during their first few years together. She has been debt free ever since. Her secret: paying with cash.

During one recent visit, I noticed she was still using cash to pay for things. She had envelopes labeled for various expenses and an amount set aside in each one. She indicated that when the money is gone, it’s gone and this keeps her on track with her monthly spending.

It seems terribly inconvenient to me. She could use a debit card for the same results… but for some reason the cash method is working for her, so why change it. However, for millions of other Americans — especially younger ones — cash is a thing of the past.

On Sunday, Elizabeth Olson at The New York Times wrote, Who Needs Pocket Change When You’ve Got Plastic? She writes, “Every morning on his way to the Concord, Calif., high school where he teaches physical education and health, John Nunan buys his breakfast. After he swipes his card through the reader, his bank debits the purchase from his account. He often repeats the process for lunch and dinner.”

“Mr. Nunan, 25, is part of a group that some major credit card companies and banks are calling Gen P, or Generation Plastic. It refers to spenders 18 to 25 years old who are increasingly using debit or credit cards, collectively known as payment cards, for nearly every on-the-go purchase.”

“The convenience and speed of such electronic transactions are drawing in users, but there are pitfalls. Those who fail to keep track of their bank balances can quickly fall into a financial danger zone. Ending up in the red can lead to costly overdraft fees.”

“Nevertheless, more consumers ” especially younger ones ” are shunning cash and paper checks almost entirely. Already, a majority of people in their 20s are using payment cards, according to a study conducted last fall by Experian Simmons Research, a market research group in Fort Lauderdale, Fla.”

“While every segment of the population is increasing its use of plastic, this group uses payment cards far more often and is leading a shift away from conventional payment methods. A nationwide survey conducted for Visa in April found that 40 percent of Gen P pays with plastic for purchases of $25 or less at least four times a week.”

Even the good ‘ole fashioned board games (think Monopoly) that taught us as a kids that cash is king thought the “old fashioned” part needed to go as Darren Murph at Engadget reported last year. He writes, “Parker Brothers is phasing out the cash-based version’s funmoney and replacing it with an ‘Electronic Banking’ flavor that could leave Mr. Moneybags turning his pockets inside out as his stash is replaced by a magnetic strip.”

“New kits are completely devoid of the famous multi-colored bills; instead, you’ll find phoney Visa debit cards and a calculator / reader which keeps a running tabulation of your riches — or lack thereof. A deal was struck with Visa to design the mock cards and readers, presumably after surveys showed that 70% of adults used cash less often now than they did a decade ago (no surprise there).”

But going cashless takes discipline. Paula addressed this topic in a previous post. She writes, “Think about it ” how many times have you made a credit card purchase and not even consciously thought about it at all until the bill showed up. Heck, we have so many ‘easy’ automated payment arrangements available to us these days that we can spend our entire monthly income without even taking any action. If you’re not careful, the cumulative effect of this autopilot mode can leave you strapped for cash each month, stuck with mounting debt, and robbing your different savings accounts to transfer money from Peter to pay Paul.”

“Now a note to those of us steeped in the ‘e’ world. You can’t use your technological sophistication as an excuse to duck the reality of the cash method. Your options for sticking to the cash method even with internet purchases and automatic payment plans are to use your debit card or a cash account within Paypal (or something similar like an e-check). Then, you get the benefit of both worlds.”

She concludes, “Try it out for a few months. I guarantee it will allow you to accurately assess, adjust, and stick to your budget.” It worked for my sister twenty years ago… and it’s still her method today!