What’s the one thing we do that is good for us, that we enjoy doing, yet causes us pain? Paying in cash.
Today, in the interest of research, of course, I went into Starbucks and bought a coffee. Grande, caramel macchiato, thank you. Starbucks recently increased their prices, by the way, so I paid more for that carmel-y deliciousness. I’ve stopped using my Starbucks app and have started using cash, so I handed over a five, took my change and then I realized — I don’t drink as much Starbucks as I used to.
What really surprised me is why.
I didn’t want to “pay” for it. Paying cash for things hurts…physically. And science backs it up.
This interesting study done by Carnegie Mellon University talks about how spending cash activates pain receptors in the brain. Paying with a credit card? Not so much. The study says “You swipe the credit card and it doesn’t feel like you’re giving anything up to make the purchase, unlike paying cash where you have to hand over bills.” Credit helps us spend more…more than we should. Why do you think fast food restaurants have credit card readers now?
So what does this have to do with managing your money? When you start feeling the impact of your purchases (the pain), you start thinking about your purchases more and whether you really need to make them. You may find you don’t need that $4.35…er, $4.65…coffee as much when you have to pay cash for it…and that will leave more money in your pocket.