Cash or Credit

Each issue of AARP Magazine has a feature called Ask Sid.

This month the question asked was "If I pay with cash more often, will I spend less?"

Chances are you'll spend less money if you use cash for your purchases rather than a credit card or gift certificate. According to a 2008 report in the Journal of Experimental Psychology, when you pay in cash and "can feel the outflow of money," you have a greater aversion to spending. In another study published in April, researchers found that the type of cash you carry also effects this "paid of paying." They reported that consumers are more hesitant to break a larger-denomination bill than to spend several smaller ones. In other words, you're more likely to want to hang onto a $20 bill than four $5 notes.

This is a piece of advice everyone needs to know and remember.