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Where Is the Money? How to Control Electronic Spending

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Cash Is Your Friend

These days more people are flexing plastic to make payments of as little as $2 for things like coffee, newspapers, and parking fees. But all those mini-charges on your credit or debit cards quickly add up. Peterson recommends budgeting a certain amount of pocket cash per month and committing to spending only what you carry for small purchases. That will also help you curb impulse buys and save anywhere from $200 to $300 a month.

How much should you allow yourself? Peterson suggests keeping a "spending journal" for a week in which you scribble down the cost of all incidentals, then reviewing it to see what to cut. Budget wisely, but don't let it rule your life. "Budgeting is like dieting -- the stricter the diet, the harder it is to adhere to, and you might wind up gorging yourself on junk food in a fit of weakness," he says. "Allow for some give so you feel that you have breathing room."

Why do we buy less when using cash?

Your brain says "ouch." When you fork over a few bills and see your thinner wallet, the insular cortex, a region that registers negative emotions, becomes more active than when you use a credit card.

Originally published in the March 2009 issue of Family Circle magazine.