The cash cure: Can it help you reduce your debt?

By Justin Boyle

Personal finance advisors can suggest all kinds of ways for you to get the debt monkey off your back. Most of these methods use a sort of technological approach to your money struggles, like negotiating zero percent balance transfers between credit cards or making use of budgeting software like QuickBooks and Excel.

A few friends of mine in Austin, the free-spirited and unorthodox capital city of Texas, are taking a considerably low-tech approach to money management that's proving impressively effective. They are, if you can believe it, carrying cash.

The story of the cash renaissance

It might come across as odd that Austin, known in some circles as "Silicon Hills" for its booming tech industry, is serving as an incubator of what seems like a technological step backwards when it comes to personal finance management. According to my Austin friends, though, the decision to switch from plastic to paper came about like a lot of things do in the birthplace of Whole Foods Market: organically.

Austin is home to a thriving culture of street food, served hot and fresh-made out of converted motor homes, trailers and ice cream trucks that aren't all credit-card ready. Additionally, many of the mom-and-pop taquerias in Austin's booming East Cesar Chavez district also subscribe to the policy of cash and cash alone at the register.

As these friends of mine started carrying cash to enhance their access to the world of local cuisine that Austin has to offer, a couple of them noticed that they were winding up with more money than they expected in their checking accounts at the end of each month. It didn't take a huge amount of effort to make the connection between their new cash habits and the uptick in their bank balances.

How carrying cash helps you manage your money

There more than a few reasonable explanations for this phenomenon. We'll take a look at three of the main ones and give a few details that can help you determine if the cash cure is for you:

1) Cash is like a preset spending limit. If you carry cash for a night out, expecting that you'll wind up at a cash-only register for your late-night tacos or barbecue, then you budget your spending for the evening while you've still got the best of your wits about you. Nobody makes sound financial decisions under the influence of convivial revelry and a couple of Pisco Sours.

2) You're only using money you actually have. Credit cards provide a sort of protective service: you'll almost never be unable to buy something. This service, though, can turn into an albatross around your neck when you spend beyond your means. Cash (and debit plastic to an extent, although we'll talk about that next) makes sure you don't go overboard.

3) Purchases are more meaningful. When you get used to magnetic-strip money, whether it's debit or credit, you barely think anything of whipping out a card on a whim. Before you know it, you can put yourself deeper into debt for something you never really needed. When you're using cash, the purchases you make give you feedback you can feel. You're less likely to fritter away hard currency when your pocket will feel empty afterward.

The real cash cure

Of course, just carrying cash to make everyday purchases isn't going to magically extract you from debt. Not every one of my Austin friends folded their leftover monthly dollars into the balances of credit cards with money on them. Those who did, though, are taking their cash habit to the next level and using it to help them get and stay above water financially.

The world of grocery credit cards, gas cards with rewards and free airline credit card offers galore can indeed provide benefits to the financially savvy, but good old-fashioned cash money can be a powerful piece of the puzzle for those struggling to manage debt and spending. Take a month with paper money and see if it shines up your budget. Who knows, you might even like the way a stack of cash fills your hip pocket.