Chapter 6: Money Around Town

Tyler Durden: "You are not your job. You’re not how much money you have in the bank. You're not the car you drive. You're not the contents of your wallet. You're not your f*** khakis. You’re the all-singing, all-dancing crap of the world."

– Fight Club (1999)

How Much to Pay for Stuff

Spending money is wrapped up in a lot of emotion. We don’t want to get ripped off. We don’t want to seem cheap. We want to brag about deals. We want to show off luxuries. We feel superior because we spend more than others. We feel superior because of how frugal we are. Those losers in coach. Those idiots in first class. Pride and envy, always jostling for the top spot.

I’m not your shrink, but I encourage you to keep some perspective and be smart about your spending. Regardless of your income, there’s more stuff to be had every day, more temptations to which to succumb, more “bucket list” experiences on which to blow your money.

But here is a simple truth: if you want to reach your savings goals faster, spend less. It’s up to you to draw the line. In that spirit, here are three pointers to keep your spending in check.

  • Check lifestyle creep. As your income (hopefully) increases so does the urge to splurge: more expensive cars, homes, vacations. But it can be more subtle. In your twenties, you launder and iron your own shirts. In your thirties, you drop them at the cleaners. In your forties, you buy them by the dozen and open a new one when you need it. In your fifties, you're hand-tailored all the way. Go back to spending like you’re in your twenties.

  • Consider buying used (or last year’s model). Cars lose 61% of their value in the first five years. Last year’s fashion sells at 50% off—even more if slightly used at a thrift shop.

  • Negotiate everything. Ask for the employee discount; the cash discount; the “old age” discount; the “good customer” discount; the Wednesday, Thursday, Friday…you get the point. It never hurts to ask. And arm yourself with information. Research and comparison shopping are easily done on the web.

How to Pay for Stuff

Remember the role of money as a “medium of exchange?” This is where we talk about some tips, tricks, and pitfalls when paying for things day to day.


Cash has the great benefit that you can’t spend more than you have. For people who tend to be a little loose with money, cash helps control spending impulses.

Cash can get you discounts. Some businesses post separate, lower prices for cash. Those that don’t may still give them—if you ask. You might be surprised how much you can save even on larger transactions, such as car repairs.

Cash transactions are anonymous, if you care about that kind of thing. The flipside to anonymity is security. There is some risk of loss or theft when carrying around a wad of bills.

Cash also makes it harder to track your spending. You need to save receipts or make a note of purchases, whereas with cards you have statements to which to refer.

If you like cash, you’ll want access to ATMs that don’t charge any fees for withdrawals. Make sure the machine you use is in your bank’s network.

The ability to pay with cash is becoming more limited. Some large transactions may not be feasible, and even some smaller purchases—such as in-flight purchases on major airlines—must be made with cards.


Checks are a risky form of payment, and unless a business requires it there is little reason to use them. Avoid carrying around checks since your account number and other personal details are printed on them. Also, to avoid hefty returned-check fees, make sure that there are funds in your account when the check is cashed. Sometimes this can be weeks or months later when you’ve forgotten about it.

Debit Cards

Debit cards are a lot like cash. They hit your bank account immediately. If you have not signed up for overdraft protection, transactions will be rejected if you don’t have enough money in your account. You know right away, and there is no fee.

For businesses that offer a lower cash price, that price will sometimes be honored for debit cards.

Most debit cards are processed through one of the major payment networks: Visa, Mastercard, Discover, or American Express. This means that any store that accepts these cards should honor your debit card.

If you need to contest a fraudulent charge, debit cards can be a hassle, depending on the bank. By law, they can require you to contact them within two days. Wait longer, and you could lose up to $500. [7] Then you have to wait for the money to go back into your account. If you have the option, avoid using debit cards in situations where you might need to dispute a charge if things don’t turn out as expected. Examples are online orders, deposits on big purchases or travel, and recurring payments (such as gym memberships where charges might continue even if you cancel).

Credit Cards

Credit cards are a huge double-edged sword. They are great for payments, but terrible if you carry a balance. To take advantage of the benefits, always pay off your entire credit card balance by the due date.

When you use a credit card, merchants pay a percentage of the amount to the credit card company; 1.5% to 4% is typical. They are willing to do this because it allows them to have more sales. Some businesses, notably gas stations, explicitly charge higher prices for credit card transactions.

Many credit cards give you airline miles, loyalty points, or money back on purchases. You can trade in these points for deals on airfares or hotel rooms. [8] Butdon’t let the point tail wag the purchase dog. Getting 3% cash back on a $100 purchase that you wouldn’t have otherwise made means you’re $97 poorer.

A big benefit of credit cards is they protect you against unauthorized transactions. You’re not responsible for charges you didn’t approve. Credit card companies are getting very good at spotting and alerting you to suspicious transactions and will let you instantly block the card against further use.

You are also covered if something you bought with a credit card is defective or not as described. The first step should always be to try and work things out with the seller. But if you can’t, contact the bank and dispute the transaction. They will reverse the charge and handle the dispute with the merchant.

Gift or Reward Cards

These cards (or apps) are a little like cash, but not really. Let’s use one of the biggest, Starbucks Rewards, as an example. You put money on the card. Then you get a free coffee for every $25 you spend. If you’re a Starbucks junkie and keep the balance low (say, under $25) this can be a good deal. But if you keep a high balance or don’t go often, it’s not. You’re just letting Starbucks use your money. And if you want to cash out, you can’t—except in chai lattes. Still, people have $1.6 billion (that’s billion with a “b”) stored on Starbucks cards.[9]

Another reason not to have big balances on gift cards is that if the business goes belly up there’s a good chance you will lose whatever amount is still on the card.

If you do opt for these cards, be sure to either use the app or register your card so you can recover its value if it’s lost or stolen.

Your Smartphone (or Watch)

Money has moved onto your devices. A variety of apps can be linked to one or more of your credit cards, debit cards, or bank accounts and used to make or receive payments. Some of these apps store balances, others just move money in and out of your accounts. Its best to keep any balances small. You don’t earn any interest on them, and they may not be insured by the FDIC the way bank accounts are.

Apple Pay, Google Pay, and Samsung Pay are among the largest of these digital wallets. Each lets you make contactless payments at merchants that accept them. Digital wallets are a good way to use credit or debit cards. Transactions are very secure because they don’t reveal your card numbers.

To send money to—or better yet, receive money from —individuals you can use one of an ever-increasing number of peer-to-peer payment apps, including Apple Cash, PayPal, Venmo, Cash-App, Zelle, and Facebook Pay. They offer convenience and low cost. However, check twice before pressing “SEND”. There is no “JK” button to take back a payment.

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