This is a guest post from Danny Kofke, author of How to Survive (and Perhaps Thrive) on a Teacher’s Salary.

Times are tough. Many are finding it more difficult to stretch their dollars. I know this first-hand because I am a school teacher, and my wife is a stay-at-home mom with our two young daughters.

Despite earning a modest income, we have managed to own all of our possessions (including two cars!) except our house, set aside a six-month emergency fund, and invest so that we are on track to retire as millionaires. We live a financially secure life on a teacher’s salary.

One strategy that has helped us is to use cash to pay for our purchases as much as possible. Here are three reasons I believe that cash is king:

We know where our money is going
I believe that one reason so many people are in financial trouble is that they do not know how much they are spending. It’s not the big-ticket items that are hurting most of us, but rather the $10 lunch here and $5 coffee there. These add up over time.

Pulling a set amount of cash out of your account on a weekly basis for your expenses can help eliminate this mindless spending.

We spend less
There are studies that show you will, on average, spend 12-18% more when using a credit card instead of cash. For most people, it’s much easier to swipe a card through a machine than to pull out the green stuff.

Using cash causes my wife and me to think twice before making many of our purchases. This leads us to buy only those things that we truly want, since we’ve paused to consider before opening our wallets.

You can get a great deal
Here’s the fun part. Most stores are hurting because people aren’t spending as much as they used to. Many are willing to lower their prices if you offer cash when buying their products.

A month ago, a friend told me she was going to an electronics store to buy a television that was listed for approximately $1,000. I told her to walk into the store with $700 in cash and tell the sales associate that she really wanted that particular television but this was all she could spend on it. After some talk, the associate agreed — my friend saved $300.

This approach might not work at all stores, but it doesn’t hurt to try.

I know that not everyone will be able or willing to use this approach. But I hope that my examples have shown you that there are advantages to using cash. With the credit markets tightening, I really believe that cash will be king during the next few years.

J.D.’s note: I know that GRS readers are divided between the “cash only” and the “wise use of credit” camps. I believe both have their merits. Though I’ve elected to join the “wise use of credit” folks, I support those who opt for a cash-only lifestyle. For more on this option, check out my pal NCN at No Credit Needed. Photo by Refracted Moments.

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