Dave Ramsey — Cash vs. Debit

by Katy on March 29, 2009 · 28 comments


Dave Ramsey

I am currently reading Dave Ramsey’s wildly popular book, The Total Money Makeover: A Proven Plan for Financial Fitness. This book is often mentioned by writers I respect, so I thought I would give it a whirl. (Plus he’s coming to speak in Portland, and I thought I should familiarize myself with his teachings.)

My copy is from the library and literally took months to come in. Unfortunately, it was due yesterday and I’m currently paying twenty-five cents per day to read it. (Hardly a smart financial plan on my part, although I should finish reading it tomorrow while the kids are in school.) 

The main premise of the book is stop living a debt-ridden life and start only buying the things you can afford. Make it a priority to pay down all debts and start an emergency fund of cash savings. 

Solid logic that I can stand behind.

One of Ramsey’s money management techniques is to only spend cash money for all life’s essentials.

Budget $100 for per week for groceries? Put that amount in an envelope and stop buying food when it’s gone. 

But here’s the thing, I actually spend more money when I have cash in my wallet.

My baby wants a new pencil sharpener at the art supply store? I do have a couple dollars on me. Why not? He’s a great kid and deserves nice things!

The situation reverses itself when I’m cash poor.

I know you want that cool pencil sharpener, but I’d hate to put a $4 purchase on the debit card. How about you clean your room and find the four million pencil sharpeners you already own?

I’m really good about not impulse shopping. I’ve even gotten myself to abstain from previously frequent thrift store explorations, and when I do I’m vigilant about only buying the things we need. Not the things I want.

I’m not saying that I couldn’t train myself to be more self disciplined with cash, I just don’t feel the need to. Yes, I do have debt at the moment, (which is related to our money-pit of a fixer-upper, not fancy clothes, meals and vacations.) but we’ll pay it off in a year or so.

I was talking to my step-mother Lindy last night about cash vs. debit, and her response was this:

“But if I only have a set amount to spend on food, then I wouldn’t be able to stock up on the foods we buy when they go on sale.”

I thought this was a interesting argument. My grocery bill fluctuates greatly from week-to-week, as I can go quite awhile without buying anything. This is balanced when spend a large amount all at once to take advantage of deals.

Another argument in the cash vs. debit debate came from my son’s first grade teacher a few years back. She had been a victim of identity theft, and had moved her finances to a pretty much cash only system. I don’t remember the details, but she felt in control with money, but had lost that trust using her debit card.

I do have credit cards, and use one for buying gas. Otherwise, I leave them alone. We are currently carrying a credit card balance that’s related to the loveliness of home ownership, but are getting it paid down rapidly.

I will continue to read this book, (even at twenty-five cents per day) as I feel there’s much to be gleaned from Ramsey’s intense focus on living a debt-free life. 

Do you feel your finances would be in better control if you only spent cash? Have you found tools and inspiration from Ramsey’s writings and radio program? Please share your insights in the comments section below.

Katy Wolk-Stanley

“Use it up, wear it out, make it do or do without.”

{ 28 comments… read them below or add one }

Jan March 30, 2009 at 2:16 am

I am a HUGE Ramsey fan! First, I’m inspired by listening to the callers/viewers who call in & claim, “I’m Debt Free”. I love listening to how they do it. Also, I realize my debts are nothing compared to the people who have 6 figure debts not including the house.

Second, the envelope system is a tried & true method. It’s re-training your brain. When you hand out cash, you do have a connection to it, so I don’t want to hand too much of it over.

I think 1 way to handle the grocery dilema you spoke of is to put the $ in the envelope & if you don’t need to buy alot of food that week, the $ sits there until you need to stock up.

Just a suggestion. I’m a faithful listener/viewer.


Lisa March 30, 2009 at 6:22 am

We put all purchases on the credit card so that we can receive points. (It also helps us to keep track of our $$.) Then we pay the credit card off every month.

We haven’t had a revolving balance since we had to pay our son’s hospital bills 7 years ago. (I worked a year at a part-time job to get rid of that debt.)

I like paying by credit because that way I don’t run short and I can buy whatever I want. Of course, the trick is I don’t “want” much at all.


Kori March 30, 2009 at 7:18 am

My hubby and I are very much on the Dave Ramsey debt-reduction train! After going through a layoff in 2002, and subsequent SEVERE cut in income, we didn’t do so well in living below our means and we racked up a LOT of debt. I had been listening to Dave for several months when this past New Year’s Eve, my hubby and I sat down and talked about our plan for 2009. Basically, our plan is to get debt free using Dave’s snowball method – we already did Baby Step 1 (put $1,000 in savings) and now we’re rolling the debt snowball downhill in a hurry.

Katy, I do agree with you on the cash thing. Not only am I supremely paranoid that if I have cash, I will manage to lose it, I am also a lot more likely to have an impulse buying problem if I carry cash. I know it’s a mindset shift, but I feel like with all of the other changes we’ve made in our attitude towards money and how mindfully we’re living, we’ll still be okay using our debit card.

Especially seeing our success already – we’ve paid off about $7,000 since January! It’s AMAZING what you can accomplish when everyone gets on the same page and you have a plan.


Jeanine March 30, 2009 at 7:20 am

I can’t do the cash thing.

I’ve tried it and it just doesn’t work for me.

It’s a mind thing to me. I start off with x amount..and that’s it. When it’s gone…it’s gone. If I don’t use it all…it might sit there till the next week/month, it might get xfer’d to savings.

I have a connection to all my money…whether its cash or card. It’s all mine that I worked hard for, and am having to spend out, and having to keep an accounting for…..


Kat March 30, 2009 at 8:14 am

I’ve tried cash but the problem is I can’t get to a bank very often and therefore all my paychecks are direct deposit. I do transfer money into a savings account fairly often and the money is reserved for helping me pay off student loans once I graduate.
To avoid spending extraneous money: I just don’t carry any with me, cash or cards, when I’m not going to need any. If it’s not there I can’t buy anything.


carolyn March 30, 2009 at 8:40 am

You may already know this, but if you borrow from Multnomah County’s library system, you can pay your fines and renew your books online at http://www.multcolib.org That might give you some extra “free” time to finish the book.


thenonconsumeradvocate March 30, 2009 at 9:48 am


Thanks for the tip, I already have the library site bookmarked. Unfortunately, (or fortunately depending on your point of view) The Dave Ramsey book is not renewable because so many people have it on hold.

Keep the suggestions coming though.

Katy Wolk-Stanley
The Non-Consumer Advocate


Angela March 30, 2009 at 10:01 am

I haven’t read Dave Ramsey’s book, but it’s on my list because so many people have mentioned it (some of them on this blog).

I think the key is the mindset, the awareness of how much you’re spending. I actually do that a little better using the debit card rather than cash, because everything is written down and I can do my balance every month. It’s very easy. There’s no way I could suddenly make a big unplanned purchase and not notice it.

But I MAY actually spend a little bit more for small unplanned purchases if I have the cash on me, like Katy said. I always like to have cash, but not too much. And I definitely stock up on groceries when our staples go on sale.


Meg from FruWiki March 30, 2009 at 10:10 am

I use a debit card and rarely carry cash. I find it hard to track cash purchases, especially small ones, with cash because I KNOW that I will not keep up with receipts.

Plus, I feel really insecure when I carry around cash. My mom, though on a very limited income, carries around wads of cash and I worry that one day she’s going to lose it somehow.

With the debit card, I feel much more secure, I can see where my money is going and I can easily check to see how much money is left. Plus, I can’t spend money I don’t have — unlike with credit cards.


mary March 30, 2009 at 11:10 am

I haven’t read David Ramsey’s book yet, but it is on hold at the library for me. When I was growing up, my parents never had a credit card or a debit card. They always paid in cash. If they didn’t have the cash, we did without it. So when I began living on my own, I didn’t have credit cards either. Spending just cash was normal. To keep track on spending I do my grocery shopping once a month. I always had a limit, so I concentrated on high value foods and didn’t buy junk foods. Then the rest of the month was just gas and unplanned expenditures which were small. another thing I also did was put my reciepts in the consult of the car, after the shopping trip, or filled the car with gas the reciepts went directly there. At the end of the month I retrieved them from the car. It became a habit.


blackgirlinmaine March 30, 2009 at 11:48 am

I have been doing the envelope thing now for a few months and while its getting better, I do find its not as easy as I thought it would be. I think it works for some but me, I am in the fence.

Overall while I think Dave has some good points, the emergency fund being one, some of his ideas oversimplify things. I am also not a fan of his tone…it drives me crazy.


camelama March 30, 2009 at 1:06 pm

I also use debit/credit instead of cash, because I can track and control MUCH easier that way. Especially as I can export my online bank/credit account records onto my computer, and import them into Quicken – take 5 seconds and thus I’ve got an incredibly detailed spending database that I can whip up trends, sort by various means, etc etc. Before I head to the grocery store I check my records and see where I am budget-wise, so that I know if I can do a stock-up-run, or just a buy-for-tonight-only run. I also pay off credit cards immediately after each purchase – not even waiting until the end of the month – so I still get all the points/benefits of the cards, but I never ever carry a balance. I spend almost *triple* normal spending when I do cash only. Doesn’t work for me.


Kara March 30, 2009 at 3:09 pm

I am a huge Dave Ramsey fan. That may be because he helped get us focused and gave us hope. I don’t know that you will get much useful information from the book as you seem fairly financially stable. The book is geared more to people who are in lots of debt.
I do prefer the cash system, my husband likes having a debit card. When I make a budget and have it divided into categorizes, and I have $20 my hobby found envelope then when the $20 is gone I have to stop. I tend to fudge more and buy more when I can just use the debit card. My husband works more like you seem to (spend more) when he has the cash in his hand.
You don’t have to spend the whole amount that week/month. If you have money left over at the end. Lets say, $15 in food leave it there and just add to it the next time that you get paid. That you give you the money to stock up when you need to. The point is just not to spend more then you make. You could choose to spend more on food if you found a good deal, but you would just have to take it from another envelope. What Dave gives our family is hope that we can get though our debt and that with planning we can live the life that we want.


Rebecca March 30, 2009 at 5:07 pm

This may be because I’ve grown up with technology (I’m 20 years old), but I prefer to use my debit card and keep track of my budget in my head and online, because the digits in my head and in my online bank account seem more real to me than bits of paper. I’ve tried using a cash-only system to cut out some small, frequent indulgences (a hot chocolate every so often, a used book every here and there…), and I’ve found handing over paper money at the grocery store feels vaugely ridiculous, like I’m paying with Monopoly money. Most importantly, it didn’t work for me, because spending cash doesn’t feel like I’m spending money! If I swipe my debit card, take a moment to calculate down to the cent what my new balance is, and fix that number in my head, THAT feels like spending money. The numbers in my head change, the numbers online change–something about my “data cloud” being updated seems more final and real than spending an arbitrary amount of cash.

I guess it’s just all what you’re used to.


Karen March 30, 2009 at 5:53 pm

I am half-way through Dave’s book and I like much of it as do most of the rest of us on this blog, I guess.

I think for me the critical difference is debit vs. credit. I will not put ANYTHING on a credit card since we started his plan. I didn’t actually cut them up, but locked them in a drawer instead. I don’t use them. Am not even tempted. But I use my debit card all the time. I don’t actually run out of money at the end of the month with the debit card either. And the extra carries over to the next month.

I tried the envelope thing and the writing everything down thing when I first read “Your Money or Your Life”. It just seemed too inaccurate (lost receipts) and too much work for me, when I can see every single thing I spend with my debit card online every single day.

The one thing that I got from YMOYL that helped the most was trying to see how many days I could go without spending money. Delaying “instant thoughts” from becoming “instant purchases”. That was VERY helpful to me. I put a $ on my calendar when I spend money and try not to spend anything until at least 1 day has come between a purchase day, usually 2 or 3. It makes my purchases more thoughtful and more in line with needs than wants.


rebecca March 30, 2009 at 6:08 pm

Part of it is the audience Dave is trying to reach, which is people with big problems. For many of them a system, like the envelope system, that is very different from what they are used to can help them go from spenders to savers. If you are already fairly conscious of your spending and just need to fine tune your budget it’s probably not necessary.


diane pedrosa March 30, 2009 at 6:28 pm

short and sweet….even though mr. ramsey is an expert, the beauty of being an individual is doing what works for you. i run into this all the time. “so and so” says this but after trying it, hey, this works better. so do it your way;)
another thing……i am so glad you are ok after your accident at the fun park!


thenonconsumeradvocate March 30, 2009 at 7:38 pm

The generous folks at Dave Ramsey are providing me with two books. One as a review copy, and one to have as a contest prize. I will get the contest up and running as soon as I have it in my hot little hands.

I returned my library copy today so that the fines would stop, as I know I’ll have my own copy soon enough. It turns out I did NOT have time to sit down and read while the boys were at school today. I DID have time to do dishes, laundry, grocery shopping, baking, a library trip and laundry. Did I mention the laundry?

Thanks for all the great comments, keep ’em coming!

Katy Wolk-Stanley
The Non-Consumer Advocate


Gerard Kiernan March 31, 2009 at 3:44 am

I heard a piece on NPR about how folks do better by carrying cash in large denomination only, since they have a mental block about handing a $100 bill over to the clerk at the Kwik-e-mart for a Squishy.
This is all from the fascinating field of Behavioral Finance, where our wierd psychology intersects with cash. There are great books out there about this. There are people doing EXPERIMENTS to answer these very questions and racking up Nobel Prizes as they go!
If you get a Nobel Prize for your efforts, request it in platinum ingots weight at least fifty pounds, since you will be less likely to blow it immediately on Goodwill items.


Kelly March 31, 2009 at 8:05 am

I feel like you with regard to my debit card. I feel guilty pulling out my debit card for a small impulse purchase, but the same guilt doesn’t apply if I have the cash on hand. I know it is the same money, but it seems silly to swipe a card for a small purchase. I think when making bigger purchases the cash only approach could be helpful, but I think the discipline is the same either way. a debit card is your cash in the bank, not an endless line of credit. It just takes a little more self control not to make the big splurges.


Mary Ann March 31, 2009 at 8:48 am

It seems to me it is easier to overspent when I pay with my debit card. I don’t have to worry about the amount, but when I pay with money, it is harder to part with. I can see the money leave my hands.


Julie March 31, 2009 at 10:31 am

Hi Katy,

Jacob and I have been into Dave for a while. We don’t use the envelopes though. We are down to just our mortgage. “Don’t buy crap” is pretty much the motto in our house. Our entertainment is two subscriptions to an online gaming site, netflix and GARDENING 🙂 Oh, and an occaisional trip to Europe.
I don’t feel debt free. When the house is paid for….. then I will call in and scream “We’re debt freeeeee!!” I listen to the radio show on my way home from work. I think it is AM 1190 and starts around 7pm. Dave has a great sense of humor and wicked logic. A no-nonsense guy who has been there and done that.

PS I loved wicked too. Glad you got to see it for free. I just started “Son of a Witch”.

Hope to see you soon.


Kristin @ klingtocash March 31, 2009 at 1:03 pm

After reading Total Money Makeover and Financial Peace Revisited, we do use cash for some things that we aren’t very good at budgeting. My husband gets blow money each time he gets paid ($20) to spend on whatever he wants. Sometimes he uses it for lunch, a pack of gum, whatever. He takes a lot less money out of the ATM since we started the blow money thing. I’m also going to start carrying cash for groceries. Since I’m self-employed, I “pay” myself once a month to cover all the nonbill expenses. I have the luxury of taking all my grocery money out for the month and spending it as needed. Most people don’t have that luxury. I think that cash system works for some people but not all. It might work in some categories. It’s really up to the individual and their level of control over their budget.


Pam Gotcher March 31, 2009 at 3:04 pm

I am a BIG Dave Ramsey fan. The one problem I have with a cash-only life is that it makes it more difficult to keep track of expenses. If I use my debit card for everything (even/especially small purchases), I have automatically logged every purchase. And that makes it way easier to make & stick to a budget or just keep track of where your money is going.


Clean Simple April 2, 2009 at 2:00 pm

Great news about the book contest, I’ll be back to enter for sure!

I agree that what’s key is doing what works for you. If cash leads to impulse purchases, that won’t work. Being aware of where your money goes is more important than what particular system you use to keep track of your money.


mari April 9, 2009 at 2:48 pm

I had just finished reading Dave Ramsey’s book. Next paycheck ,I am starting to save back 15% for my retirement. I will also start to “snowball my car loans. Evenually I will like to pay off my morgage.


Deb May 31, 2009 at 12:09 am

We were debt free, outside of a mortage, for 11 years. Then we decided to do something completely against our nature. We took out a home eq loan to purchase a second fixer upper home on 4 acres, whilst keeping the 1st home as a rental.

Murphy’s law sunk its hooks into us. Hubby’s business shrank to near death level. Permit problems, remodel delays, trees crashing on the just finished fence, etc. We ended up carrying 2 mortgages for 15 months instead of the 6 months we had planned. That spells credit card debt (now down to 9k from last year’s 17k). To top it off, hubby is facing back taxes with the IRS for probably at least 3 years, if not more (squirrely ex business partner & lousy bookkeeping).

Reading & listening to Dave Ramsey is the only thing that has kept me sane. We’ve a long road to haul, but we’re working the debt snowball every month. I cannot do the envelopes of cash thing, it’s just too complicated for us. The credit card is parked at 0%, and we use debit card only. We do keep hard core track of every dollar that comes in and that goes out on our spreadsheet, and a current month’s tally of grocery expenses and the very rare eating out total.

We’ll never ever put ourselves in this position again. We shoulda listened to Dave FIRST!


Scott April 12, 2011 at 12:10 am

As a retailer/ small business owner(and as I am sure most other retailers feel) I/we HATE credit/debit cards as a form of payment for goods and services. We must incorporate credit/debit card fees into the cost of doing business, and in my case as a small bar/restaurant owner who also absorbs the 1.4-3.7 % deducted from the tips that are paid to the bartenders/cooks on a card, now I have to raise prices even higher. Believe me when I say that any small business owner HATES “Plastic”. There is a “Per Swipe” fee and a percentage. I just figured out tonight that for me to accept plastic is equivalent to nearly 10% of my net income $4000.00/year (do the math). Believe me -it hurts ,especially when you think that the cc companies just sit back and collect money. Sure They give points for airline miles ,etc.,but guess who pays for it-You Do-in the extra 2% that you pay on EVERYTHING.Imagine if businesses in America didn’t have to pay an average of nearly 2% in cc fees, etc. If you could save 2% on everything that you buy/pay for each year-you could afford that airline ticket and a whole lot more. For you credit card people who carry 10,000.00 or more worth of debt that is accumulating interest each year-just paying the minimum; the interest alone could be equal (approximately) to an extra mortgage payment per year so on a $250,000.00 mortgage over 30 years (on average a $250,000.00 house/mortgage over 30 years of interest@5%-7% would cost 3x the initial price-so $250,000.00 x 3 = $750,000.00) you could knock off approx. 7 years of payments by making 1 extra payment a year and reduce the 30 year loan to 23 years which would save nearly $100,000.00 over the term. Thats approx. $3700.00/year in mortgage savings per year-nearly triple what you are paying in cc interest.So you can pay the cc company $1000.00-$2000.00 a year, or save nearly $4000.00 a year . The difference is like giving yourself nearly $5000.oo a year in tax free cash-and THATS only on a 10,000.00 credit card bill. Think about it pay off $10,000.00 credit card bill this year, make that house payment, and save $5000.00 a year-or give yourself a $5000.00 cash raise or bonus each year-forever. Now these are rough estimates. Different houses, different areas of the country, different mortgage/ house payment schedules, – I,m just throwing out some #s. It could be more -it could be less. Think of where you could: fly to, stay at, buy(in cash-because it is 2% cheaper in a non credit card world) with the extra money. Bottom line- pay off and destroy those credit cards. A few years of less fancy shoes now will equal better shoes plus additional clothes, longer vacations, fancier cars, etc.- later. Please do America a favor, pay your local small businesses in cash-save them 2% which will save you 2%. Add up 2% of what you would save over your lifetime and buy yourself a new Ferrari. I hope you get it. If you don’t believe me- ask your parent, teacher, friends parent, banker- whomever you can trust -actually bankers and credit card companies are the devil and will tell you how its only “Pennies on the dollar” when if you manage your money properly, its more like” $2.00 on the dollar”. Save a little now-Have lots and lots and lots later. TRUST ME-Pay off and destroy that plastic. Your friend and financial advisor and bartender and bar owner-Scott!


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