My Cashless Month

Money on fire

Back in July, I read The End of Money, a book about phasing out physical currency in the developed world. The author gives numerous reasons that he believes it’s in everyone’s best interest to go ahead and shift to using cash as little as possible. As one who tries to implement truth and practicality whenever I encounter it, I was intrigued. For me, there could hardly be a larger shift in the handling of my day-to-day finances; I’ve been using a cash-based envelope system for my entire adult life. Could I make the jump to transacting and tracking all of my expenditures electronically? Would it be that much more convenient and helpful? I decided to try it for a couple of months.

Being somewhat tech-savvy, I first sought out the right tool for the job, ultimately landing on Mint.com due to its good reviews and easy-to-use mobile app. Within a few days, I had connected all of my accounts with their read-only system, even my HSA which I never check due to the credit union’s subpar online banking. I have to admit that it was quite nice to see a full financial picture in one place for the first time. Prior to integrating with Mint, I had to log into four or five different sites to check balances, and if I actually cared to sum any of the figures, that was up to me. With Mint’s mobile app, I could easily see daily fluctuations in retirement accounts (for better or worse), and their basic analytics even showed that my portfolio has drastically underperformed the major indexes this year, a fact that I would never spend the time to unearth myself. So far so good. This cashless thing may work out.

When it came time to port my budget over to Mint, however, is when I felt the first friction. Perhaps rightfully so, everything in Mint revolves around “the month.” Budgets are created for the upcoming month with expected income declared and expenses divvied into numerous categories. This may work fine for someone who gets paid bi-monthly, but I currently receive my paycheck every two weeks, meaning my income will seldom, if ever, fall at the beginning and end of the month. Because their system of tracking expenses focuses on staying “in the green,” I would start off in the red immediately. You don’t get paid until the 6th this month, but you spent $10 at Chipotle on the 2nd? You, sir, are in the red, regardless of the balance in your checking account. To say this is annoying is putting it lightly. Though it would be a foundational shift to their system, allowing users to set budgets for specified date ranges would make a world of difference. In my case, it would make the tool actually useful.

The other hurdle I encountered in using Mint was the delay in posting transactions. When spending cash, it is literally instant; you can see the bills dwindling in your wallet each time you visit the grocery store or a coffee shop. With today’s financial network (which stems from the 1970’s), it often takes three or four days for “credit” transactions to clear. This is a big problem for someone trying to make the most of their income. Unless one wants to keep a tally of expenses in his head (which defeats the purpose), there’s a tendency to be overly-cautious or overly-carless. Frankly, I took the latter approach. Once the mess of delayed transactions in Mint seemed too difficult to reconcile and untangle, I kept telling myself I would figure it out later. That time never came, and I still haven’t fully pored through bank statements to assess the damage done. Suffice it to say, I know that I overspent considerably on restaurants and other social fun.

A final consideration, one which Wolman mentioned in his book, is that spontaneous generosity is seldom possible. Were I to come across someone selling a street paper or in need of a couple dollars, I was effectively powerless to help. It became all too easy to give the calloused response, “I don’t have any cash. Sorry.” While I try to be judicious in giving money to strangers, I found my heart becoming hard due to not even having to wrestle with the thought. In a sense, carrying no cash distanced me even further from those in need, shutting down the conversation before it could even begin. “Suppose you see a brother or sister who has no food or clothing, and you say, ‘Good-bye and have a good day; stay warm and eat well’—but then you don’t give that person any food or clothing. What good does that do?” (James 2:15-16). Coupled with the reckless spending I fell into, I did not like who I was becoming. Swiping my card all over the place and budgeting via mobile app, I became too hip, self-indulged, and uncaring.

So where does this leave me? As of my last payday, I made the ritual trek to an ATM and withdrew the cash I would need for the next two weeks. Ultimately, my attempts to go cashless left me feeling out of control, both in the sense that it was too easy to spend carelessly, and in the sense that I invested much more time managing money day-to-day, my finances effectively controlling me. I have returned to my trusty Google Docs spreadsheet whereby I spend five minutes each payday allotting funds, withdraw the necessary cash, and have few worries as I open my wallet for the next couple of weeks. Simple? Sure. But it works, and ultimately, going cashless did not work for me.

Until financial systems are advanced enough to eliminate transactional lag, until there is a well-integrated budgeting tool which is flexible enough to fit any situation, and until those in desperate circumstances are able to deal in money electronically, I will likely be carrying cash. The truth is that I have always done a hybrid system, paying many bills online and being paid via direct deposit, and I imagine that most people do. At this stage in the game, it doesn’t make sense to be an extremist and eliminate cash, even if that’s where society ultimately ends up.

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Thoughts on “The End of Money” by David Wolman

The End of Money by David Wolman

 

Given the first six years of my adult life, my relationship to cash and personal finance is somewhat interesting. Straight out of college, I got a job working on Dave Ramsey’s web team. For those unfamiliar, the radio host and author espouses a back-to-basics approach to finances. The cornerstones of his message are avoiding debt in all its forms, saving up for emergencies and large purchases, and utilizing cash for day-to-day expenses. As I favor myself a common-sense person, I’ve been using this system since I was twenty-two. In specific, I’ve used the “envelope system,” literally driving to an ATM each payday to withdraw the cash needed for food, entertainment, and other expenses for the next couple of weeks. I have to say, thus far it has worked great for me and kept me from a number of monetary pitfalls.

That said, I was intrigued when I first spotted The End of Money by David Wolman. I confess that as much as I love learning and being challenged, sometimes I do avoid a book if I think the author’s biases and intent seem too obvious. Why take the time if I already know what they’re going to say, right? Indeed I have my own biases against credit card companies, banks, and their influence on our culture. That said, I finally consumed this book in audio form on a recent road trip, and it has given me some things to think about.

Though the initial chapter meanders through more of a narrative style, explaining how the author came to be interested in the topic at hand (and possible ties between the Apocalypse and a cashless society), the pace soon picks up with a history of money tracing back to its earliest appearances in civilization. While interesting to a fact-collector such as myself, the truly compelling portions come thereafter. I will only hit the highlights and sections which I found of particular interest.

Wolman points out that the notion of cash is so ingrained in modern Western culture that we are often blind to its costs. It is always assumed to be the cheapest way to do business for both consumer and merchant, but this can be far from true. First, there are the vast sums of government money required to mint, distribute, and monitor currency. The exact figures escape me, but I believe them to be in the billions per year. (As a fiscal conservative, anything that can be done to shrink the federal budget is a plus in my book.) Then there is the infrastructure required to shuffle money around, from bank vaults to armored cars to guards who attend it each step of the way. Lastly, there is the real cost of time involved in transacting with cash; if time really is money, the labor involved in businesses making change and keeping denominations on-site is more than negligible. True there are card processing fees (usually three percent) for vendors to account for, but in many cases the costs of manpower are higher. Could the efficiencies of moving to more of a cashless society actually spur economic growth? I think there are too many variables to say, but it’s a thought worth entertaining.

Further, there is often a psychological comfort to having cash in hand, as if it is the safest form of money. True, having a tangible representation may be one step above digits stored on a remote server, but there is nothing intrinsically valuable about coins, and much less bills. The reality is that we already live in a cashless society, passing around tokens of little worth, and we have since leaving the gold standard. There is nothing but good faith backing the dollar sign, whether it is on a screen or a piece of paper. As one driven by logic, I admit that this fact is compelling given the potential efficiencies mentioned above. There is nothing inherently safer about hard currency, and in fact the risk of carrying it may be greater in some cases with regard to loss and personal safety.

The last section which I found compelling deals with the argument that cash is actually a system which keeps the poor impoverished. It took quite a bit of explaining, but in the end I can see where the author is coming from. To those of us in developed nations, swinging by the ATM is an inconvenience, but to those without access to transportation or infrastructure, dealing in cash bears a much higher cost. Wolman states that the average cost of a bank visit for a consumer is around one dollar, considering time, effort, and other factors. To one who earns only a few dollars a day, this is a true hardship. In economies where electronic money transfer has been put into the hands of many via cell phone banking, growth has always followed. Saving money electronically is easier than hoarding bills which are always at the risk of being stolen. People seem able to lift themselves out of poverty more easily when the efficiency of electronic payment enters the picture. From this perspective, there may even be a philanthropic element to phasing out cash.

All of these points have led me to try an experiment. For the next month, I am going to try dealing in cash as little as possible. For a technology professional like myself, this may seem a little late in coming, but my method has worked well to this point, so I saw no need to mess with it. Given new information, however, I’m willing to take a second look. (This in no way changes my decision to live below my means and avoid credit at all costs, however.) I will be utilizing Mint.com to budget, track, and categorize spending, with the end goal being that I stick to my budget as well as a cash-based system. Honestly, I’m skeptical after years of having the psychological advantage of seeing bills dwindle from envelopes as the month wore on, but should the experiment succeed, I see no reason to continue making trips to the ATM. I may even gain more insight by having financial information to dig into in digital form. Ultimately, however, I am a pragmatist, and I will stick with whatever works best, regardless of the insights provided by the book.

Overall, David Wolman delivers an interesting and thought-provoking read on the nature of cash and its role in our society. Though it is thick on history and may meander from the central topic at times, the information he presents is clear and generally without bias, even if his personal worldview does poke through in a few editorial remarks. I say it’s worth a read for anyone loosely interested in economics or cultural trends.

The End of Money is available via audio book from the Nashville Public Library and multiple formats on Amazon.com.