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  • Living in a Cash Society

    I’m on my way home today (yay!), and looking forward to sleeping in my own bed, and hugging my husband and children. But I enjoyed my time in Japan, and on a personal finance front, I couldn’t help thinking about the cash society that Japan still is (my last trip here was nearly 10 years ago). At a time when I rarely use any cash and completely failed at an all-cash experiment a few years ago, I was fascinated that cash is still the most common method of payment.

    Japan is known for having one of the highest personal savings rates, and given the prominence of the use of cash, I can’t help but think that the two go hand in hand. After all, personal finance bloggers and experts emphasize how switching to cash from credit cards decreases spending by forcing you to be aware of exactly how much you’re spending. Money Saving Mom is my favorite example, since she is not only a shining example of cash-only success, but also regularly publishes success stories from others.

    However, I also can’t help noticing that personal safety is still less of an issue in Japan than it is in the U.S. Many women carry bags without zippers, because they don’t have to worry about someone reaching in to take the contents. I’d guess that most people carry a fair amount of cash with them, without worrying about being mugged. (Although, I have noticed that some areas are a bit more sketchy than they used to be – maybe a side effect of the recession?)

    Paying with cash in Japan has brought back reminders of what I dislike about using cash – the accumulation of loose change, how much longer it takes to pay because you’re hunting for bills and the correct change, and the time it takes to put away any change while the store clerk politely holds the bag out. (And that’s one thing that hasn’t changed since the last time I was here – the unfailing politeness of store clerks especially always stands out to me as there’s such an extreme contrast to the U.S.)

    All in all, I will be very happy to be home and to go back to using my credit card to pay for purchases. However, I’ll continue to try to be as aware of my spending as I would be if I were paying with cash.

    Where do you stand on the all-cash system of personal spending?

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    Marriage & Money: Be a Team

    A friend of mine is going through a difficult time right now – her marriage is on the rocks, and while there are many reasons why, the big one that comes out every time we talk is money and the fact that she and her husband have lived well beyond their means for years at this point.

    One thing that strikes me is that it’s impossible for them to tackle their financial problems right now because they’re not doing anything together. And I realized that all of the “we did it” stories I’ve read about couples who’ve achieved financial success have one thing in common: They did it together.

    That’s certainly true in my own life. When I wrote about becoming debt-free except for the mortgage, I used the word “we” to describe the steps we took. And while I mostly handle the day-to-day money management for our household, we make decisions together. For example:

    We agree to live beneath our means so we can save money.

    We discuss decisions that involve spending larger amounts of money, like the kids’ summer camp.

    We set priorities together, and work toward a mutual goal, such as paying for private school.

    In the last few years, my husband and I have paid off all of our non-mortgage debt, established a comfortable emergency fund, and positioned ourselves so that I could take a huge pay cut to work from home. None of these goals could have been achieved if we weren’t on the same page, working as a team toward the same goal.

    So the lesson of the day is: Your family’s financial success requires everyone to work together as a team.

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    When you’re in the red

    It’s been a time of big expenses for us, as we’ve paid for our property taxes, income taxes (we owed some this year), plane tickets and more. That means we’ll spend a couple of months “in the red” – that is, spending more than we’re bringing in. And even though we have the money in savings (and some of the expenses were actually budgeted for), spending more than we make causes me great discomfort and even a little anxiety.

    A big part of that is my personal lack of income – as a blogger, I don’t make anything close to what I used to make as a lawyer. But there’s not a whole lot I can do about that now. So . . . here are some tips for coping psychologically when your expenses suddenly outweigh your income:

    Stem the tide – Spending can be like a break in the dam. First there’s a slow trickle, but the pressure builds up and boom! – there’s a big hole in the wall. The trick is to patch the dam before the hole gets too big. You can do that by questioning every expense, and asking yourself if it needs to be made right away, or if it can wait for a while.

    Cut back where you can – Things like eating out, gourmet groceries, a night out at the movies, and so on can almost always be put on hold while you get your finances back on track. For me personally, this often means limiting shopping solely to the grocery store for perishables only, and not stocking up on something I don’t need immediately, even if it’s a good price.

    Bring in some extra income – This is one of those times when doing little things to bring in extra income can have a bigger impact on your mental state than your actual bottom line. You can sell some stuff on Amazon, eBay or Craigslist, have a yard sale, or take surveys (I like Pinecone Research best). And that’s just a few ideas – there are many other ways to bring in a little money.

    Declutter – It never ceases to amaze me how much better I feel about everything by decluttering a room, closet or other area. In this particular situation, it’s a good reminder of how much I have, how little I need, and that everything is going to work out just fine.

    Maintain perspective – Sometimes spending money makes sense, whether it’s paying the taxes to avoid paying even more in the form of a penalty, or going on a rare trip to see family. The purpose of saving money is precisely so that it’s there when you need it – at times like this. Keeping that in mind helps to relieve the anxiety of seeing the balance in your bank account go down!

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    Final March 2012 Shopping & Cash Experiment Update

    I did a modified all-cash experiment for my grocery and drugstore spending in March, and ending up going over my $500 budget (as I predicted I would last week). The total stands at $568.23, although I think I’m missing a few Walgreens purchases using the Friends & Family coupon on Friday, and the final total should actually be more like $590.

    My spending in the past few months was also around $600, so that just seems to be the right amount for my family. As I neared the end of the month and that $500 mark, I realized that I wasn’t willing to give up those things that would put me over – namely, the organic and hormone/antibiotic-free products that I choose to buy, stock-up items like butter, and donation items that will be put to good use in the coming weeks.

    For example, I’ve begun stocking up for the post office’s Stamp Out Hunger food drive in May. And Challenge butter was $1.49 at Ralphs through Saturday, so I bought 12 pounds last week. We’ll use it all in the next six months or so, and I wasn’t sure I’d be able to get that much RBST-free butter that cheap again now that Ralphs has eliminated double coupons.

    So I don’t regret going over budget at all. And I don’t regret doing the cash experiment either. I did find that I was inclined to spend less when I was using cash, and I could have kept my costs down if I’d made different choices. That realization alone made the whole experiment worth it – it’s nice to know that I’m not mindlessly spending money on groceries, toiletries and household items. The amount I spend is a good balance between keeping expenses minimal while still accomplishing my priorities of serving my family organic and hormone/antibiotic-free products, and helping others. ^_^

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    Shopping & Cash Experiment Update – March 27

    I’m doing a modified all-cash experiment for my grocery and drugstore spending in March. After setting some parameters, my total stood at $402.16 when I gave my last update, 20 days into the month.

    Today, on Day 27, I went over budget. That’s right, I crossed the $500 mark in spending for the month at Trader Joe’s this morning.

    I could have stayed under budget. But that would have eliminated some donation and stock-up items, and I’d rather spend a little extra while paying as little for them as possible.

    Right now, I’m just over budget, but I will probably spend a little more before the month is over – I haven’t been to the Farmer’s Market or Whole Foods yet this week!

    I want to gather my thoughts over the next week or so, and then I’ll share my final impressions about this cash experiment with you.