Experts tell us that the primary reason casinos prefer chips over cash is because chips add a little mental separation between the gambler and his valuable money. It’s a little easier for you, the gambler, to place a big bet because it’s just chips. Logically, you know what those chips represent. But since it’s not actual cash in your hand, you feel slightly less inhibition towards taking bigger risks.
Basically, it’s a matter of psychology. If you use chips, all you need to do is throw a single chip down on the table. It doesn’t look like much. It’s just a single, lonely chip sitting there in the middle of green felt. All it takes is a second and the money is gone. That is just one of the many reasons I don’t gamble.
But follow me: The same principle applies when spending is done with plastic vs. cash. It turns out that multiple behavioral economics studies back up these assertions. One of the most often cited studies is one conducted by Dun & Bradstreet, where the company found that people spend 12-18% more when using credit cards instead of cash. McDonald’s reports its average ticket is $7 when people use credit cards versus $4.50 for cash.
So here is the bottom line: If you want to spend less and save more, put away the plastic and start using cash. The old-fashioned envelope system works perfect to keep you on a budget and out of financial stress. Simply take your paycheck, cash it, put the money you need in an envelope and don’t pull out the plastic when you are running short. Try it and let me know how you do saving more money!
