Archives for October 2013

Today, I wrap up my two-week experiment using cash. It was an utter failure, and I hated using cash. What I’ve gained in coinage, I’ve lost in faith in the all-mighty dollar. While I tried to look for positives from using cash, I found my little experiment to be quite telling. Credit and debit cards are now a fundamental part of my purchase process. I’d take a slim credit card with benefits over the greenback.

Coincidentally, as my experiment ended, a recent story about the costs of cash was published on CNBC. The article pointed to recent research that suggests that cash costs as much as $200 billion per year to the American economy (Chakravorti & Mazzotta, 2013). This study sounds an alarm: businesses, consumers, and the federal government are suffering the consequences of cash usage. The old vestige is detrimental to everyone involved.

Time and fees add up to serious cash costs. From foreign ATM/Transaction fees, account fees, time spent (trying to access cash via ATMs, banks, etc.), and thefts of cash, billions of dollars are lost. For consumers, the primary loss is incurred in time spent getting cash. Turns out that searching for and accessing money via an ATM actually costs America more in time than the fee associated. For businesses, the largest detriment is in retail theft, as many companies can’t afford Brinks trucks and armored protection of funds. Lastly, the governmental cost is monumental. Due to printing costs, management, and uncollected taxes (due to cash-based avoidance of taxation), the government loses about $100 billion from cash.

Fundamentally, cash should be dead, but there are a number of holdouts and reasons to worry about the decline. Cash is one of the only methods for private transactions (non-traced), can help manage out-of-control spending, and can even be advantageous when buying things like gas. Likewise, wealth gaps are leading to more cash users in lower incomes – inaccessible to newer banking technologies for a variety of reasons.

Generational differences may change all of this. Younger generations (those under 25) carry far less cash, when compared to older adult populations. (65 and older). As I struggled to use cash, it dawned on me that I haven’t used cash every day since middle school/high school. It doesn’t come naturally to me, and I’m looking forward to using plastic again.

Resources:

http://fletcher.tufts.edu/CostofCash/~/media/Fletcher/Microsites/Cost%20of%20Cash/CostofCashStudyFinal.pdf
http://www.cnbc.com/id/101103705

Over the last couple weeks, I’ve been writing and trying out an experiment in only using cash. It’s been years since cash was my primary payment method. Because of the transition to a cash-only lifestyle, there have been some hiccups, inconveniences, and problems. Generally, cash feels cumbersome, difficult, and challenging to use. As a budding minimalist, a slim, little credit card seems far easier. But today, I wanted to recognize the money-saving advantages of cash.

1. Cash Is Concrete

It’s hard to deny that handing over cash is a painful process. Purchases necessitate hard-earned money disappearing before your eyes. The concreteness of cash makes it bigger than a random set of numbers in my online, digital bank account.

Removing cash out of an ATM seems like an old-fashioned and foreign act to me. Comically, I feel out of place punching in my pin. But afterwards, the cash spits out and I carry it around, feeling the bills in my pocket. They slosh around and are cumbersome, but they’re real, and that’s the point. This reality of concrete cash may be key to saving money.

2. Cash Slows You Down

Sometimes, I’ve hated this part of switching to cash. It seems awkwardly slow. For people waiting behind me in lines, I feel slow as I dumbly reach for the right denominations and then the clerk needs to fish for the correct change. The process takes more time, but as I reflect on using cash, maybe that’s a good thing?

Cash is more challenging to pay with, but it forces the purchaser to spend more time thinking about the transaction. Do I really need this rash, rush purchase? Slowing down helps aid in the decision-making process and make frugal choices. Suddenly, by slowing down and reaching for cash, I became more mindful of what, how, and where I was spending.

3. The Coin-Operated World

Maybe it’s not an everyday occurrence to venture off to vending machines and laundromats, but it’s important to recognize that there’s an entire economy based in cash/coin. Every couple weeks I venture off to my local laundromat and plop down a surprising number of quarters (after exchanging bigger bills) on a few loads of wash. 

Perhaps this isn’t an advantage, though. Cash is the only option. Credit and debit cards don’t work in this world – nor are there ATMs nearby. Having some cash is more than a choice – it’s a necessity.

4. Gas Stations Respect Cash

Gas stations are one of the few remaining bastions for cash. Interestingly, gas stations tend to offer cash-based transaction discounts that can be worth the switch. For some reason, consumers are known for using cash quite regularly at gas stations, too.

Saving a bit off the sticker price at the pump can go a long way over time. The advantage can become a little degraded by high-reward credit cards that give bonus points for gas purchases. In that case, cash doesn’t save you much more.

5. My Budget Doesn’t Surprise Me

This is my favorite part. When I look at my Mint.com account, I see a basic budget – total savings and debt. The debt is a subtraction and weight to my budget, and it updates frequently with a newer, lower number. Unfortunately, that information is delayed and often needs to be updated before becoming interpretable.

Meanwhile, cash is always accurate and reflects the exact amount you have. In the wed design and coding world it’s called WYSIWYG (What You See Is What You Get); or, what I like to call, “What You See Is What You Have (WYSIWYH). When I look at my wallet or bank account, I know exactly how much money I have. This fluctuation changes instantly – no syncing required. Ultimately, using cash gives me a surprisingly powerful peace of mind.

When browsing the web, as a consumer, all you need to do is type in a web address, press enter, and you’re off. Within seconds, a website will load before your eyes – nearly anywhere in the world. This technological feat feels like magic, but it’s simply code. Underneath the fanciful features and design of the web is a source code. This carefully crafted language, which can be seen above, enables the web to come alive and be interactive. But it’s also brought about a secret underworld that’s threatening user privacy in the name of profits.

The Gateway To Profits

I established Frugaling.org to have an outlet to write about the struggles of student loan debt, credit cards, making a budget, and much more. In the process, it became clear that this outlet could help me pay off some of my burdensome debt. Slowly, I began with Google AdSense. The AdSense platform is one of the largest ad networks in the digital space. Google partners with advertisers and publishers – taking a handsome cut as an intermediary. By doing so, Google allows average bloggers like me to finance what I love to do: write. Moreover, Google ads offer my viewers highly-related and contextual options that can help them on their journey to zero debt.

Then, I decided to accept private advertising spots and engage in affiliate linking. All of these efforts have been conducted with the hope that my users will benefit from the advertising and support the website in the process. From coupons to credit cards, the offers have been very popular. In order to provide this service and site for free, I’ve chosen to fill the open spaces with ads. Frankly, I’m not a big fan of advertising. If I could get rid of it, I would. But being able to pay off my debt is essential, and funding for an ad-free domain hasn’t been availed to me.

The Free Economy

Once a marketing gimmick, free has emerged as a full-fledged economy. Offering free music proved successful for Radiohead, Trent Reznor of Nine Inch Nails, and a swarm of other bands on MySpace that grasped the audience-building merits of zero. The fastest-growing parts of the gaming industry are ad-supported casual games online and free-to-try massively multiplayer online games. Virtually everything Google does is free to consumers, from Gmail to Picasa to GOOG-411. – Chris Anderson, Wired

The free economy has led web developers (like me) to a dichotomy: either accept privacy for a price or profit over user data. This is a painful realization, as I for one appreciate a certain level of privacy. By placing ads on my site, I’ve opened a can of worms that’s more potent than the images upon the screen. Much like the rest of the site, the advertising often contains trackers and beacons that monitor user activity. Even though users may not click on the ads, their visit is documented, logged, and stored for varying lengths of time. This process happens largely without explicit consent from the visitor.

Tracking The Trackers

Let me illustrate this point. When you read over this text, scroll the browser page, and choose to click somewhere on the site, around 20 trackers are active. Everyone from Google to Reddit to Twitter is watching your visit. Personally, I think that’s beyond creepy. While I’m hardly alone in advertising products that contain trackers, I can’t help but question the decision. Have we sacrificed everyone’s right to privacy in the name of profits?

Even Google Analytics is beginning to give developers information about their visitors’ demographics and categorical interests. When I realized this was accessible to me, I figured it was time to write about this issue. It feels like too much. While I appreciate the information about my users, this does a disservice to anyone that appreciates privacy, discretion, or informed consent.

Today, I’m writing as a web developer, user, and student. I’m tracked everywhere I go by my phone’s geolocation, my university’s servers log every website I visit, and my website adds to a murky mix of tracking. I’m both at fault for employing these analytics and simultaneously demanding reform – a hypocrite and an alarmist. Both developers and users/consumers must come together to realize how the two can coexist in respectful harmony.

Time To Take Action

What’s the answer and where do we begin? As developers and writers, I think we bear some responsibility for changing these wayward ways. Beginning now, I’m experimenting with new forms of tracking that respect user privacy by anonymizing IP addresses (which can pinpoint your location), deleting logs after certain periods of time, and keeping your information in-house. In the process, I’m evaluating the full-scale phasing out of using tracking technology that is now evolving to capture your age, gender, and interests. But the fundamental question of how I’ll make money remains.

That’s where users’ responsibility begins. In the mean time, users should defend themselves with privacy-enhancing tools like Disconnect.me, Ghostery, and AdBlock Plus. By utilizing these tools, users can block most – if not all – the tracking around the web.

Unfortunately, these are short-term solutions for a larger revenue and funding problem. There’s still a fracture between what users are willing to pay for written content and the privacy they desire. Without governmental oversight or intervention, changing business practices for the sake of users seems impossible. Longer-term, having users pay for content and supporting writers is fundamental to an ad-reduced and/or ad-free environment (without plugins). If we could get to the point where visitors could support writers through donations and private (tracker-free) ad deals, this could provide a solution.