I just finished an interview with Dan Ariely, Duke professor of behavioral economics and New York Times best selling author of Predictably Irrational, as I’m working on getting more substantive background for my upcoming book.

My upcoming book (title is a surprise) comes out later this year through Pearson. It examines why we do the silly things we do with money and gives advice on how to turn our irrational financial ways into effective money-securing and money-making behaviors. 

Dan’s book is extremely eye-opening and I enjoyed it cover to cover, especially when his research spoke to our irrational issues with money

For example, did you know that cash keeps us honest? That’s what Dan’s extensive research has proven. For years I’ve been saying that cash helps us save because it has real financial limitations a credit card lacks. Once the cash is gone, you can’t spend anymore…but now my message is much deeper: Use cash because it’s not just practical, it’s the RIGHT thing to do. We will be prompted to make smarter purchasing decisions. When we use credit cards and carry a balance month to month, we’re getting something without really paying for it…well, let’s be honest…we end up paying double or triple over time with all that added interest. In the end, we cheat ourselves out of our hard-earned money.  “When we deal with money, we are primed to think about our actions as if we had just signed an honor code,” says Dan.

So why do we struggle to pay with cash? (Besides our desire to live beyond our means) Because it’s painful, says Dan. He calls this the “pain of pain.” He tells me to imagine going to a nice meal and at the end of the dinner I pay with either a credit card or  cash. Which feels better? For most people it’s paying with a credit card. Why? “When the timing of comsunption and spending coincide we enjoy the experience less.” For this reason we also gravitate to “unlimited” monthly deals and “bill me later” options – even it means we end up paying more than we would if we opted for a pay-as-you-go plan.

If you want to save money – you should opt to do things that have more “pain of pain.” And guess what – people are opting for more “pain of pain,” as evidenced by Visa’s latest earnings report in which the company said more consumers are making debit transactions (i.e. real cash in their checking accounts) instead of credit (i.e. fake money).

Hmm…I wondered if there was a cheerier name for this strategy? Dan laughed. Bottom line, he said, you want to choose financial options that make you much more conscious of your money, especially if saving is a priority. According to Dan: “If you want to give it a good name – say thay you want to make more thoughtful decisions…Be deliberative.”