February 11, 2009 2:02 PM

Making Cash The New Credit

By
Randall Pinkston
(CBS)  These days, when Mary Ellen McGuire shops, she pays with cash. No credit cards for her. The pile of bills on her kitchen table is a constant reminder of her credit crisis.

One of the bills has already gone to a debt collector, CBS News correspondent Randall Pinkston reports. It's a Bank of America card with a balance of $20,011.92.

McGuire says her slide into economic ruin was gradual. What was her biggest mistake?

"Telling myself that I can beat the bank, I can... We'll win and we'll get out of this mess," she said. "After a while, you just know you can't."

Like McGuire, millions of American consumers miscalculated. Now they're turning away from credit cards in droves.

At his Guilford, Conn. office, credit counselor Scott Wilson convinces clients that going green - with cash - makes an immediate difference.

"Having to have the cash will help prevent some of this impulsive purchasing people have grown accustomed to," he said.

The key to reducing the "impulse spending" is knowing where your money goes.

To do that, experts say, create a budget.

One familiar strategy, divide your cash into separate envelopes, according to priorities;

Envelope #1 is for mortgage or rent.

Envelope #2 is for household expenses, including utility bills and food.

Envelope #3 is for unexpected expenses, such as repairs and illness.

Once you've identified your priorities, stick with your plan - don't rob the rent money to go to the movies.

Use the 24 hour rule: wait a day on potential purchases to determine if it's a need or a want.

"I feel my priority is to pay my mortgage, take care of my children," McGuire said.

How's she paying her credit debt?

"When I can, as little as I can," she said.

While it may seem impossible to pay off big credit card bills, experts say it can be done. Using cash is a good first step to getting your financial house in order.

"It was difficult at first;" said Deb Tolliver, another cash-only advocate. "I mean, the mind-set of making yourself, disciplining."

In Greenwood, Ind., it took the Tollivers four years to pay off their $70,000 credit card debt and go all cash. One trick that worked for them was paying off small bills first.

"You start getting excited about it because it is only $200 more until you pay off this next one and so let's see if we can cut something and get it paid off this month as opposed to next month," she said.

Mary Ellen McGuire is just beginning.

"I'll pay my debt off and get on with life," she said.

But she's living within her means, no matter how long it takes.

Copyright 2009 CBS. All rights reserved.
Add a Comment See all 37 Comments
by daniel_yang November 13, 2008 6:07 AM EST
I''d like to learn english from a American native(both guy and girl will do ), I can teach you chinese as in return. please leave YM or Skype account here or or send to my maibox:xiaoyaliyi@163.com. :)
Reply to this comment
by themroaches November 11, 2008 3:22 PM EST
Ummm; anyone else think Ms. Mary Ellen McGuire is a pathetic idiot?
Reply to this comment
by bobnjersey November 11, 2008 3:13 PM EST
[Isn''''''''t it amazing how people who angrily politicized EVERYTHING for 8 years are suddenly above it now that their guy won?
----------------------------------
Posted by easeup at 10:43 AM : Nov 11, 2008

yea, amazing isnt it]
[Posted by jamesm12341 at 11:13 AM : Nov 11, 2008]

so james ... do you suppose the ''angrily politicizing thing for eight years'' is only something that left thinkers suffer from ... or do you suppose it cuts across all lines?
Reply to this comment
by easeup-2009 November 11, 2008 1:43 PM EST
isn''''t it amazing that james is so blinded by his authoritarian follower condition that he sees all the problems in the world sourcing from a political affiliation ... and all the solutions in the world sourcing from the opposing political affiliation. it''''s that clean cut for james ... all good comes from this group ... all bad comes from this other group ... no exceptions.

you''''d think that even a reasonably intelligent human could go out and discover the truth for themselves ... even recognize it when it''''s presented to them by someone else.

history would be a good start ... but not for james ... he''''ll have none of that ... what would all those who have gone before for thousands of years know about life ... or anything else for that matter.

Posted by bobnjersey at 10:24 AM : Nov 11, 2008

Isn''t it amazing how people who angrily politicized EVERYTHING for 8 years are suddenly above it now that their guy won?
Reply to this comment
by bobnjersey November 11, 2008 1:24 PM EST
[isnt it amazing that libs dont blame mccain for anything anymore]
[Posted by jamesm12341 at 10:00 AM : Nov 11, 2008]

isn''t it amazing that james is so blinded by his authoritarian follower condition that he sees all the problems in the world sourcing from a political affiliation ... and all the solutions in the world sourcing from the opposing political affiliation. it''s that clean cut for james ... all good comes from this group ... all bad comes from this other group ... no exceptions.

you''d think that even a reasonably intelligent human could go out and discover the truth for themselves ... even recognize it when it''s presented to them by someone else.

history would be a good start ... but not for james ... he''ll have none of that ... what would all those who have gone before for thousands of years know about life ... or anything else for that matter.
Reply to this comment
by chotchkies-2009 November 11, 2008 1:20 PM EST
People with high credit card debt only have themselves to blame. Even though she is using the cash system, why is she still buying more clothes when she is sitting under $20,000+ of high interest consumer debt?

The entitlement mentality in America is going to be its undoing.
Reply to this comment
by jbeckett5 November 11, 2008 1:07 PM EST
Credit is a power tool. Power tools cut. Properly used by adults, they are a great help. Used by children, they cut people.
Reply to this comment
by easeup-2009 November 11, 2008 1:03 PM EST
isnt it amazing that libs dont blame mccain for anything anymore

Posted by jamesm12341 at 10:00 AM : Nov 11, 2008

I''ve always wondered how Republicans can be both ''rich greedy CEO''s'' and ''dumb rednecks.''
Reply to this comment
by presjfk November 11, 2008 1:01 PM EST
there it is in a nutshell folks....since the banks are not responsible, you dont have to be either. go out there and charge , charge , charge!! Blame it on Bush!!!
Posted by jamesm12341

I don''t know how you took this from my comments, jamesm12341. But I assume you believe only the cardholders are to blame, George Bush and the banks are blameless in all matters despite his policies ravaging our economy while making corporate America and the rich even richer - if for only a time before GOP-Bush policies blew up in all our faces.
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by jenughfer November 11, 2008 12:55 PM EST
Just because the bank says you can borrow 500,000 doesn''t mean you should. Just because the credit card limit says 10,000 doesn''t mean you should max it. While I agree that the government and banks aren''t helping it''s YOUR choice to buy a house you can''t afford. And it''s YOUR choice to buy every electronic gadget known to man. I''m not a fan of Bush either, but he didn''t MAKE you buy anything (except the HDTV) :)
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