By Karen Goodfriend

 

Q: I wanted to cut back on credit card charges, but now I'm always at the ATM. How can I find a balance?

A: If you're prone to impulse purchases or surprised by high credit card bills, switching to cash is smart. Still, you need to set a budget to help limit your spending and provide you with enough to cover your needs. Sticking to a budget can also help cut down on ATM trips and any fees that apply.

Start by writing down what you buy every month, plus how much it costs. This includes groceries, gas, dry cleaning, shopping, entertainment and coffee runs, but not mortgage payments or other set bills.

Next, decide whether each purchase should be a credit or cash expenditure. In general, put non-negotiable costs like groceries and gas in the credit category and discretionary spending like shopping and entertainment in the cash group. But remember to take your spending habits into account when divvying up your list. If you have trouble sticking to your budgeted amount for groceries, set aside just enough cash and proclaim the supermarket a credit-free zone. This will force you to make smart choices so you stay on budget.

After tallying up what you need in cash each month, withdraw only a percentage of it each week. Then tell yourself you can't hit the ATM again until your next planned visit. You'll start thinking twice about what you buy -- and you should end up saving a bundle.

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Karen Goodfriend is a certified public accountant and personal finance specialist in Los Altos, Calif. She is also a member of the American Institute of CPAs' Financial Literacy Commission.