How do you spend your money? No I am not getting moralistic on how you should spend your money, just asking.

I know of young people – I mean in their 20s and 30s who use all 3 methods of spending, and I have nothing against it. However when you use all 3 methods, tracking your expenses becomes almost a nightmare.

My  suggestion is to keep it simple. Use only one of the 3 methods. If you use cash, use ONLY cash, and use some mobile app to track your expenses.

My suggestion? get a free low limit credit card. No, I am not an Icici fan, but I have been using an Icici bank credit card for the past 30 years (or less, not sure) but I use it only for airline tickets, hotels, etc. It is my wife who does most of the buying for the house, and she prefers cash. She uses the old diary method of writing down expenses. NO. This will not be suitable today.

If you are a young couple and both of you spend money on various things – for the house, leisure, tickets, movies..I suggest one of you take a credit card and add the spouse as an add-on. This will make accounting very easy – and at the end of the month/quarter/year you can easily consolidate your expenses. In fact most of the credit card companies will give you a break up of your expenses, and life gets easier.

I am against using the debit card. I am sure all banks and regulators are getting better at risk management, but still why take chances. If somebody were to get access to your debit card, they can do serious damage to your bank balance. Real serious damage.

Of course if you have problems getting a credit card, it will be difficult for you to use one. You could consider keeping a Rs. 200,000 fixed deposit and getting a credit card with a limit of Rs. 1.5L. Use the card, BUT always pay off in full. I recently spoke to a girl who runs a family of 3 of them – the couple and a kid. Other than rent she charges all her expenses to her credit card. This is an add on card from her husband who is a banker. She’s really happy to reap one of the best benefits of this approach—the ability to streamline her payment due dates. Instead of staggered deadlines for your utilities, gym, phone, child school fees, creche, petrol, groceries, electricity and other random bills throughout the month, loading everything onto your credit card means you likely only have to remember one, aside from rent, which is nice for your sanity and for your cash flow.

The couple today have a better control of their expenses – and know how much they are spending on each item. They have almost NO CASH expenses – even the maid is paid by NEFT. So the visits to the ATM has disappeared.

However, if you are a person who has to be ‘controlled’ while spending, using cash is more useful. When you pay Rs. 700 for organic soap or Rs. 7000 for a dress or Rs. 8999 for a shoe…you may consider/ reconsider the buying.

Also your children should see the cash going out for things coming in. It is a very good way to teach them money management, but that is a different topic.

Using the credit card to accumulate points makes sense only if you know how to play the rewards game. I do not like the rewards game because you tend to accumulate things that you do not really need. A new pen. A headphone. A toaster. I do not use my points. Also to get a travel card and accumulate points hoping to get a free ticket is a hassle. I do not do it – but its up to you.