Cash or Credit?

    So do you do the Dave Ramsey cash in envelopes thing?
    This is the number one question people ask me when they find out I am retiring early. Why this keeps coming up is not entirely clear to me. Part of it is probably related to the fact that Dave Ramsey is the biggest name in personal finance. I also suspect that the people asking me are not putting much effort into their own personal finances. They obviously have read, or at least heard of, some of Dave’s principles and therefore assume I am following them. They are often surprised to find out that in some cases I do the exact opposite of the Ramsey method.
    The great thing about personal finance is that it is very – personal. In almost any situation I would advise people to make their own financial plan and use bits and pieces of advice from multiple sources to fit their needs. However, just because this is what I do doesn’t always make it the best choice for everyone. If you are in a bad place financially, as I think most of Dave’s audience is, I understand following a prescribed plan as if it is the gospel truth. To those who have spending problems and always carry a credit card balance, then yes you should put your credit card on ice and use Dave’s all cash budgeting method. 
    As for myself though, I use a credit card almost exclusively for several reasons.
  1. I, nor my wife, have a spending problem. I have our credit card set up to automatically pay the balance in full when the bill is due. Thus, we never have to worry about paying late fees or absurd interest rates. Because everything from our groceries to our electric bill are paid by credit card we amass a lot of points. On our Citi Double cash back card this equates to 2% back on all purchases. In a given year this could be between $300 – $500 dollars in cash back. 
  2. All expenses are in plain sight on the credit cards app. If I used cash I would have to keep track of all my receipts to know where my money is going. On the other hand the credit card company is nice enough to provide me with a detailed list of my expenses as soon as they hit. If I am over budget for the month it only takes a couple minutes to figure out why.  Checking the app regularly has also helped us catch credit card fraud before the purchases even went through.
  3. If I have cash leftover in an envelope at the end of the month I personally think I would be more likely to spend it. Say I have $20 left in my beer run envelope. How tempting would it be to go splurge on a couple six packs even if I don’t need them.*
  4. It’s easy. Call me lazy but it is really easy to carry a credit card. I also hate change…as in coins. They are prone to flying out of my pockets when pedaling.
    Luckily, in this great country we live in, we are free to manage our lives as we see fit. I’m not saying Dave’s method is wrong. He has been wildly successful with his teachings. Yet for me personally I don’t think this one is good fit. As for my advice to you the readers (hopefully it’s more than one). Don’t blindly follow someone just because everyone else is. Do some research and work out something that works for you.**
Enjoy the Ride,
*I don’t actually have a budget for beer and we would never drive somewhere just to get it. Walking or riding, however, is a different story. I would highly recommend the Topeak MTX DXP bike bag with foldout panniers. It fits almost anything including a six pack of bottles (although cans are far easier).
**Nobody ever asks me about debt. I wonder why? Dave preaches to avoid debt at all costs. Even ‘good debt’ such as a mortgage. While I think this is a little unrealistic for most people I also agree 100%. Most personal finance difficulties start with some form of debt. 
Which will it be?