February 3, 2014

This is the year that I makeover my finances by transitioning away from credit cards. So bye-bye, plastic. Hello, cash. This new strategy has also been kinda painful. To my surprise, it’s creating a completely different lifestyle. But in the long run, I’m sure I will be better off.

The Year of the Wood Horse is the perfect time to rethink money issues. Wood horses are considered Fire animals. They bring a productive year to those who carry on with enthusiasm (fire) and begin new projects (wood), according to my friend Jeffrey Yuen, a world-famous master in the Chinese healing arts.  

A wood horse embodies the type of energy found in a young horse or a wild stallion. These are magnificent, untamed creatures that must be nurtured well. He said the approach is “like teaching and rearing a young child.  The caution would be its immaturity and gullibility, which can be manipulated by others.  So avoid risk and impulsivity.”

The same goes with money matters, Jeffrey adds. On the money front, the theme continues. Impulse buying is a no-no. Beware of objects of desire that beckon with their colors and shiny newness. “Stay with things that are already in progress and that shown solid footing,” he advises. 

With this new focus, I’ve spent the past week celebrating the lunar new year by reorganizing my purse. The credit cards have been put away. Instead, I’ve been walking around with paper currency stuffed in my wallet. It’s been decades since I’ve shopped regularly with greenbacks. Returning to this prehistoric form of commerce is both a challenge and a revelation.

The other day, I pulled up to my local gas station and paid for a full tank. Handing over two 20s instantly thinned my wallet. From there, I went to the neighborhood drug store in search of a new hair clip. The one I liked came in three sizes. A week earlier, I would’ve thought nothing of buying them all for a $40 charge to a credit card.

But after one look at my flattening wallet, I chose only the smallest hair clip, which cost $5.91. Still, I was running too low on cash. When I headed down the block to the health food store, I didn’t have enough money left to cover basic groceries. Ouch, ouch, ouch.

Revelation #1: Paying in cash is a reality check. Benjamins don’t go very far these days. I’ve been peeling through $100 bills so fast that it’s scaring me. Paying cash is forcing me to weigh the value of my purchases in a way that was never possible with credit cards. Charging is so easy because I’m not really registering what’s happening. But parting with cash is tough; it’s a physical, real time, visual, on-the-spot transaction. This new process of watching my cash disappear is building greater self-awareness. I like how that feels.

Revelation #2: Apps make tracking expenses quite painless. I was never good at tracking expenses by hand with pen and paper in notebooks and ledgers. Thank God we live in the age of social media. I went on Facebook, asking if anyone knew of an effective app for helping me with my budget. After several friends commented, I checked out their suggestions and bought the $4.99 Pocket Expense for iPhones and iPads. Here are three views of what it looks like installed on my iPhone:

Pocket Expense is visually appealing, has jazzy options and is a snap to use. It also generates reports by categories and sub-categories that I can run on a daily, weekly, monthly and yearly basis. The reports can be emailed as PDFs, which is a nice feature.

Depending on your needs, there are hundreds of other apps to chose from, including totally solid free apps. One of my friends likes Mint for monthly and yearly budgeting. Two others recommend Spender Tracker as a bare bones, simple-to-use solution for daily expenditures.

Revelation #3: I’m richer than I realize. We live in a shopping culture. Yes, I do indeed enjoy spending money! But I might find it more enjoyable to conserve cash. My recent ruminations have made me appreciate what I already have. Shopping less has freed up my time too. With less errands to run, I am getting calmer. I might also be opening up more quiet space in my brain; those shopping lists create a lot of static. Relying on cash is starting to feel like a practice, a form of financial meditation.

Of course, I’m still going to hang onto my credit cards. They might be useful in a pinch. Then again, maybe not.

Stories about the growing number of credit card data breaches have me worried. We’ve gone from hackers stealing the personal information of tens of millions of Target store shoppers during December 2013, to news of a hack attack on Neiman Marcus. Last week, the arts-and-crafts retailer Michaels Stores was hit. And now comes word of security compromises at more than a dozen hotels within the Marriott, Holiday Inn, Sheraton and Westin chains.

While the FBI and the finance world’s brain trust wrestle with these crimes, I am going to simplify my life. Along the way, I expect to find all kinds of riches.

So with that, let’s have a great, prosperous Year of the Wood Horse. May we know what it’s like to run wild and free and minimize our days as workhorses. May we figure out ways to minimize stress and maximize our cash.  xo