How Cash Changes The Way You Look At Money - Dave Ramsey Rant

Chase is on Twitter, can you explain to me? How using only cash is beneficial? Well, I don't use only cash I use I pay things over the internet all the time, and I use a debit card obviously for that and I use a debit card at the gas pump and A few other places here there, here's the thing Money is weird There's it it activates portions of the brain let me give you an example okay in the internet world Including it Ramsey solutions when we put something on a website The harder it is for you to buy something the less likely you are to buy it. You won't follow through on the transaction It's called friction in the internet world If you got to stand in line at a store Some people just put the thing down and walk out of the store. That's friction The harder it is to buy something the less you buy That's thing one you need to remember now. There is such a thing as emotional friction Now what I mean by that is this in your mind right now or physically if you want to I'm gonna do it Take your wallet out if you have one. This is my wallet. I have a money clip I carry in my front pocket with hundred-dollar bills, so there's a hundred dollar bill, right? Lay that $100 bill in front of you with Uncle Benjamin Franklin's eyes piercing into your soul Okay put beside that Your debit card right? Put your debit card decided or your credit card beside it now. There's a couple things that happen when you spend the cash It hurts It creates emotional friction it activates the pain centers of the brain actually MIT did a study with MRIs and They were studying consumer behavior, and when the consumer spends cash It activates the pain centers of the brain when you make the exact same transaction with plastic You do not it does not activate the pain centers of the brain you don't feel it and so you spend more When you spend with plastic than you do with cash Tons of studies showing this the average purchase is 12 to 18 percent more that you will spend In a fast-food setting using plastic you will spend 70% more in a vending machine in the hotel lobby You will spend a hundred and seventy percent more Double triple the transactions When you use plastic yeah, I'll take chips and a coke and a candy bar, right But when you're actually putting these you have to feed that dollar and that thing right You actually feel that and you spend way less So all of that is is emotional friction You need to be aware of that the other thing that happens is this think about this. Here's what's interesting Yeah, when you were a kid If you're if you're an old guy like me you might have traded marbles with your friend Yeah, marble, and you trade something you were trade something with someone you give them something they give you something There's an exchange You hand them something they hand you something see that's what happens when you pay with cash you hand them green presidents faces They give you the item Think about what happens with plastic You give them a piece of plastic They give you your plastic back And they give you the item Isn't it subtle that there was no exchange that occurred You didn't make a trade you got your plastic back and the item Because you would never leave the transaction without your own credit card or your own debit card with you, right Well think about how subtle that is visually and how that activates the brain So all of that to say that when you spend cash you're more aware of your spending Here's an example you got to eat When you're paying cash, and you lay a hundred-dollar bill in that little black tray Uncle Ben's coffin You know it's his coffin cuz he ain't coming back You just killed the old boy off. He's gone, right? Yeah, black tray goes away. You don't ever see Uncle Ben again. He's gone Benjamin Franklin is out of here But when you send that plastic bout guess what comes back the plastic and you have a tendency to spend more on Alcohol more on desserts and pick up the other person's tab at the restaurant when you are paying with plastic Then when you're paying with cash This is why McDonald's was the first one all these years ago in the fast-food business to start taking plastic one hours when I first started this show 25 years ago nobody took plastic at all in fast food and They didn't take it the grocery store either you wrote a check or you paid cash and fast foods 25 years ago or You pay cash you wrote a check or you paid cash and because it was scary to people to think that people might actually run up debt buying groceries or Run up debt buying food at a fast food place, but McDonald's changed all of that And it wasn't long after McDonald's did us. They did a big study on behavior and And they found that you spend 78 percent more you know I'll supersize that I'll put fries with that and I'll pay for his two and give me the apple pie When it's on plastic when it's cash it's like dollar menu, baby Changes everything When you spend with cash it Changes the transaction now all of that is important to think about it think about stuff like Apple pay with your phone See that's even worse Because you're not even handing them a form of payment. You're just waving a wand your phone You're like freaking Harry Potter buying stuff here. You just waved a wand and got free stuff That's Apple pay even less emotional friction Different methodologies would pay the less emotional friction. There is the more you're gonna spend now our none of this is evil It's not like that's the mark of the beast. I'm not saying anything like that But what I am saying is is if you're gonna get control of your money you have to understand What is being done to you by these companies? They are managing your behavior, so When you spend cash it changes your behavior Function so especially when someone first starts doing a budget and trying to get out of debt and work the baby steps I'll put you on a bunch of cash at that point a bunch of cash I Still tip with cash like a valet or Always leave some cash on the bed as I leave the room and a hotel for the maid because those maids work hard man You know or if you're gonna tip you tip with cash because you know what you get you get this response like wow? But if you just include it on your bill nobody even sees it nobody feels it I want the server to be honored by the trend by the tip Think about how that works and it'll change the way you look at cash cash is an important part of your financial turnaround

Channel: The Dave Ramsey Show

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Id: 1liYvgX799Y

Length: 7min 50sec (470 seconds)

Published: Thu Apr 19 2018