Why paying with cash hurts (and why it should)

These days, my monthly budget is on the boring side. Aside from our regular spending, I've got a mortgage payment to fork over, groceries to buy, and utility bills to pay. Throw in some payments to my kids' 529 plans and my SEP-IRA and I'm basically done for the month. After all of the bills are paid, the key for us is making sure that the rest gets transferred into savings so that it doesn't accidentally get spent.

But it wasn't always this way, and I was reminded of that fact the other day when I was flipping through one of my old notebooks. That's when I found our monthly zero-sum budget for August of 2010, and that's when our old lifestyle smacked me right in the face. Want to know how many bills I paid in that month? Twenty-four.

Car payments, credit card bills, and personal loans, oh my. It's no wonder we weren't saving anything. Fortunately, it was easy to look at that old monthly budget and pinpoint the exact cause of our unfortunate situation. The problem: We financed everything and never, ever paid cash.

Low Monthly Payments for Life

Fact: You can have nearly anything you want.

I can too. We all can. Cars. Clothes. Diamonds. Trips to Hawaii. Almost any earthly possession you've ever laid your eyes on can be yours.

Well, kind of.

If you're willing to make monthly payments for as long as it takes, whether it's five years, ten, or twenty, then it can be yours. Does that sound tempting? Probably not.

But that's exactly what we do. In the fourth quarter of 2013, U.S household debt swelled to a monstrous $11.52 trillion. Of course, some of the money was borrowed to purchase homes, pay for college, or start a business. A certain percentage can also be blamed on things like medical bills, unemployment, and emergencies. But the rest? My guess is boats, iPads, and designer shoes. Oh, and let's not forget furniture, date nights, and family dinners at the Olive Garden. The rest is anyone's guess.

Stop the Cycle

We all know how easy it is to trade your car in for another. You walk into the dealership, they look your trade over, and you pick out another, nicer car. Your new car payment could even be the same as it was before. Hell, it might even go down. But are you really doing yourself a favor by trading up without the cash in hand? The answer is probably no.

I've been there. My husband and I traded cars around more times than I could count, mostly just because we would. Looking back, I think we were just bored. And sadly, we weren't able to see that there were real costs associated with constantly trading up. We only focused on the monthly payment, and never had the goal of actually paying them off.

Fortunately, we finally made the decision to change our lifestyle sometime around the time that that budget was made. And once we stopped the madness, we made one huge change that put an end to the cycle once and for all. We began paying cash for anything and everything, and we refused to add to the pile by financing things we couldn't afford.

Turning an Awkward Moment Into a Learning Experience

In the meantime, we got serious about getting out of debt. Fortunately, it didn't take long to knock out everything but the two biggest sums we owed — the loan for my minivan and my husband's student loans. I still remember the day we paid both of them off once and for all. The total was well over $10,000 and it literally pained me to hit the keys that would initiate the automatic bank transfer. I mean, it hurt. That money was mine and was earned with my own blood, sweat, and tears. And if you subscribe to the theories espoused in books like Your Money or Your Life, that money was literally my life force, and it was getting sucked away by a stupid van that I overpaid for in the first place.

I still have that van. Want to know why? Because it's paid off, as is everything else I own. And now I'm literally gonna drive that van until the wheels fall off, or until the engine finally gives up or explodes out of sheer exhaustion at maybe 500,000 miles. (A girl can dream, right?)

I learned something from our adventures in debt and from that final $10,000 payment — most notably that I never, ever want to go down that road again. Parting with that much money at once was painful. It burned. It made me uncomfortable. And now, years later, I'm convinced that that's exactly how it should feel.

Pay Cash and Feel the Burn

Since then, we've paid for everything with cash including a car for my husband, furniture, home remodeling projects, and more. And even though it has sometimes been painful, our refusal to finance anything has been a game-changer for our financial future. Here's why:

  • Paying in cash forces you to consider the real purchase price – No matter what you're buying, the fact that you're paying in cash turns it into an entirely different experience. That's because you have no choice but to consider how much money you're paying overall, and not just what you'll have to pay on a monthly or yearly basis.
  • Paying in cash might help you spend less – When you force yourself to pay in cash, big ticket items start to lose their appeal. Try walking into a dealership with the intention of paying $15,000 or $20,000 for a newer car. All of a sudden, the prospect of keeping your old paid-off junker becomes an incredibly attractive option. Am I wrong?
  • Paying in cash keeps you out of debt – The best thing about refusing to finance things is that it keeps you out of debt in the first place. We all know what a slippery slope that can be. There are so many benefits to being debt-free, including the option to save more of your income, less stress, and of course, the feeling of not really being beholden to anyone. It's a freeing feeling, and it's one that I will never, ever surrender without a fight.

If you're in debt and are ready to make a change, start by creating a debt snowball. Conquer each one of your debts one by one by one, and refuse to give up until you're finally debt-free. Adopt the mindset that if you can't afford to pay cash for something, then you can't afford it. Period. Only then will you free yourself from the chains that bind you. Only then will experience the feeling of owing nothing to anyone and the unexplainable sense of freedom that comes with it.

Once you've done what you set out to do, force yourself onto a cash-only diet. Cut up your credit cards if you have to — and learn to pay for everything with the cash you've stashed away in your own accounts, not with other people's money. Know that it may make you feel uncomfortable, and rest assured that it's supposed to. Paying cash hurts, and it should hurt.

That burn you feel? It's simply the price you pay for your freedom, and it's totally worth it.
How do you feel about paying cash? Is it painful? Do you think it should be?

More about...Debt

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Dave @ The New York Budget
Dave @ The New York Budget
6 years ago

I have been debt averse for as long as I can remember. Even now, as I start looking at real estate investing, the idea of a mortgage pains me, even though, logically, I know that I should look at it as “leverage” and not necessarily straight up debt.

Don’t pay for things you can’t afford – it seems simple, but people struggle with it. I like the idea of the cash only diet.

Marsha
Marsha
6 years ago

I teach a financial literacy course to high school students, and one of my rants is how our modern culture has twisted the meaning of the word “afford.” So many people think that “afford” means “I can cover the monthly payment, as long as I don’t lose my job or have a medical emergency, or…” No, “afford” should mean “I can pay cash without putting myself in any financial jeopardy.”

Beth
Beth
6 years ago
Reply to  Marsha

Love it! Just out of curiosity, what’s your definition of “afford” when it comes to a mortgage?

I found a huge difference between what the bank says I can “afford” and what the Canadian Mortgage and Housing Corporation’s online tool says I can afford (purchase a home that’s no more than 3x your annual salary). Obviously, the bank has more to gain if I go for a higher mortgage, and the CMHC — which issues mortgage insurance — has more to gain if people don’t default on a too-high mortgage.

Marsha
Marsha
6 years ago
Reply to  Beth

At the very minimum, I wouldn’t buy a house without at least 20% down, or whatever amount is needed to avoid mortgage insurance. I’d also have a year’s expenses saved just in case.

Don’t listen to the bank about what you can “afford.” When we were last shopping for a house (18 years ago), we were approved for a mortgage that was $100,000 more than what we needed for the house we ended up buying. We bought a less expensive house (still plenty nice though) because we like having some money in our budget for things other than housing.

Karen
Karen
6 years ago
Reply to  Marsha

This reminds me of when my husband and I were first married 22 years ago. We looked at building a new house (in the end said decided against it) and when we were told what we qualified for (“could afford”) we were told in the range of $350,000-375,000!!! Twenty years ago! He was a police officer at the time, I am a nurse…..we just looked at each other and laughed – a lot!

MoneyAhoy
MoneyAhoy
6 years ago
Reply to  Marsha

Marsha,

Exactly! If only there were more of you out there teaching the kids what they need to know to keep out of trouble. I think it’s awesome that you’ve devoted your time to this type of thing!!

Beth
Beth
6 years ago

I think understanding the overall cost of something is important! I’ve known too many people who upgrade their homes or cars and think it’s a great deal because the monthly payment is the same. Not only are they in debt longer, but their monthly expenses go up as well.

I’ll be paying for my next car with cash and I cringe at spending that much money all at once. Keeps me happy with my old car!

Lisa Aberle
Lisa Aberle
6 years ago
Reply to  Beth

I hear you on the cars! Since we expecting child #3 to make its arrival in three months, many people have asked us if we’re going to upgrade to a minivan or something larger than our car.
While I’m sure something larger would be more convenient than a car, we can still fit all 5 of us in our car. Besides, I would rather spend our money somewhere else! We’ll see how long the ol’ car lasts.

Jane
Jane
6 years ago
Reply to  Lisa Aberle

What’s up with people thinking you have to have a minivan if you have more than two (and sometimes even more than one) kid? I’m expecting my third in a few weeks, and I had a close friend actually tell me I am stupid for not buying a minivan. We are buying a new (to us) car, because we have one knocking on death’s door. But guess what we’re buying? An Accord or a Camry. You can most certainly fit three car seats across them – you just have to buy more expensive and narrower seats. But it’s still cheaper… Read more »

Laura
Laura
6 years ago
Reply to  Jane

Great Choice I have an 09 Accord and it has PLENTY of room for 3 car seats and has tons of trunk space. My sister-in-law has a 09 Camry and same thing plenty of room in the back seat and trunk space. Yay for you for not going with the crowds I too am not too fond of mini-vans plus the cars do give you a little better gas mileage and I find they are easier to park and everything in general as opposed to a larger sized mini van.

Sarah @ Little Bus on the Prairie
Sarah @ Little Bus on the Prairie
6 years ago
Reply to  Lisa Aberle

We fit two Britax and a Dyano in the back of our Murano. It’s tight and a hassle getting them in and out (the seats, not the kids), but since the older two can buckle themselves, totally not as big of a deal as some people make it seem.

Tre
Tre
6 years ago

Paying cash is so painful! We’ve been saving up for a major purchase. It’s exciting to see our bank balance grow. It’s going to be hard to give it all away for one purchase.

Laraba
Laraba
6 years ago

Like Dave (Comment 1), I have always been debt averse. I don’t feel pain when I fork over cash to buy something, because I’ve always operated that way except for a mortgage and 2 cars. The 2nd car was a new minivan 14 years ago and we financed part of it while we waited for another car to sell. It only took 2 months and I was so glad to have it paid off. That minivan is still chugging along and we are planning to drive it into the ground. What I can’t figure out is how is how best… Read more »

Sharon
Sharon
6 years ago
Reply to  Laraba

My daughter was a spender too. She complained about being given her lunch money every day, along with her clothes budget, etc. So we figured out a monthly amount and she got that on the first of the month. With all of the money in hand, she freely spent and ran out of lunch money after the first week. When she had to take her lunch to school (not cool for a girl in high school), she quickly learned how to budget the money better. You have to let your kids learn from their mistakes because the lesson is learned… Read more »

M
M
6 years ago

Holly, good changes in your life! I understand the debt load in the US seems large but–argh—it’s atrocious in here in Canada.

Shannon @ Financially Blonde
Shannon @ Financially Blonde
6 years ago

When I have clients who have spending problems, I put them on the “cash diet.” And they whine and complain that they are losing credit card points, and I tell them that when they can prove that they are responsible enough, then they can get the credit card back. Paying with cash can be painful, but it is a great tool in getting financially healthy.

Mortgage Free Mike
Mortgage Free Mike
6 years ago

Judging by my screen name, of course I don’t like debt. I believe in paying in things for full, but I do not use cash. I use credit cards for everything and pay off the balances at the end of the month. Living in a major U.S. city, the thought of walking around with a wad of cash doesn’t sit well with me. Most of the time I carry about $5 cash in my wallet.

Carla
Carla
6 years ago

I feel the same way about walking around with cash in my wallet, especially when I’m alone. I tend to spend less when I have credit cards than cash. Not having so much cash on my person is a protection financially for me too. I’m tempted to spend less.

Mrs PoP
Mrs PoP
6 years ago

From some of Holly’s posts on traveling using miles and credit card rewards, I’m pretty sure she equates “pay with cash” with “pay with a credit card that you know for certain you will pay off before any interest accrues”.

Kathy
Kathy
6 years ago

I am like you with regards to paying using my credit card and then clearing the sum at the end of the month. However, for me the reason of using a credit card is different from yours. I use it to gain points by which I can buy plane tickets. I hate debt!

Lis
Lis
6 years ago

I agree. I feel like I’m financially responsible enough to pay for everything on my credit cards (two of them – one for good grocery rewards and one for everything else), but they’re paid in full every month. Proud to say I’ve never paid interest on any bill, other than my student loans.

SouthboundSavers
SouthboundSavers
6 years ago

I agreed with everything until you said “Cut up your credit cards if you have to”. I would say, avoid being averse to credit -when it serves you- if you can. For big ticket items (cars etc) of course cash is king, and I agree completely with that. It may hurt to part with a lot of money at once (buy a cheaper car then!), but it hurts even more having to pay for it over YEARS. But I’m of the opinion that you should use your credit cards (for mostly smaller purchases) as much as you can, but treat… Read more »

Holly@ClubThrifty
6 years ago

Key Words: “if you have to”

Not everyone can use credit cards like cash and pay them off every month. For many, it’s a slippery slope that is best avoided altogether.

Kerrie
Kerrie
6 years ago

You are so right! For years my husband and I have lived in the fantasy world of “If we can afford the monthly payment, we must be able to afford it!” Then we hit on Dave Ramsey and our lives completely changed. One of the first things we did was pay off a couple of big things all at once, and it did indeed pack a punch to the gut. Somehow, making those minimum payments didn’t hurt, but sending a check for the whole shebang was quite the ouchie. The psychology of that is very interesting. Now that we’re in… Read more »

lmoot
lmoot
6 years ago

See, I have the exact opposite mind-set. I have always tried to do everything I could to funnel everything through the credit filter, and only use cash to pay off the cards. If there were an easy (and free) way to pay the mortgage with a cc, I would. Besides the rewards and tracking ability (which yes, I know are also available with debit cards), I like that I have time and room to move stuff around in my budget. I feel like I am getting a glimpse of the future with the 30-60 day float I get when I… Read more »

PawPrint
PawPrint
6 years ago
Reply to  lmoot

While I also do this much of the time, I’m curious about the “high-interest bearing account.” Where are you finding this kind of account? My highest-interest bearing account is my checking, and it’s only 1.57% up to $10K, but you have to jump through some hoops to get that.

Julie
Julie
6 years ago
Reply to  PawPrint

As relates to financing the car on a zero interest loan, we have found that the best deals come when you pay cash. In addition, purchasing a new car at a dealer isn’t particularly frugal in the first place as we all know how much the value declines when you drive it off the lot. Not sure if the 5,000 points (worth $50.00) is worth it.

lmoot
lmoot
6 years ago
Reply to  Julie

moot says: 12 March 2014 at 4:33 pm I think that the idea that cash gets you better deals (at least when it comes to mainstream dealers) is a myth. I’ve found the opposite to be true. Most dealerships are sad if you pay cash for a car, and they’re not going to give a deal on top of that because you’re losing them money by not financing and paying interest, or in the case of 0% financing you’re not letting them get their referral credit through the lending bank. When I paid cash for my very first car, I… Read more »

lmoot
lmoot
6 years ago
Reply to  Julie

Oh, and I agree with you about buying the new car. Which is why I will never buy a new car. Dealerships also sell certified used cars of multiple makes and models. When I’ve “made it” will probably upgrade to buying my cars at 3 yrs used instead of 7 years used.

lmoot
lmoot
6 years ago
Reply to  PawPrint

Meh, I was speaking in terms of relativity. What used to be high doesn’t help us any now. The 0.95% interest I earn in my online savings account is much better than the .001% interest my B&M bank pays to my checking account. Almost 1000x better…literally. That’s almost as high as the going rate for current 1 yr CDs. It’s still terrible though, I admit.

Isitaneedorawant
Isitaneedorawant
6 years ago
Reply to  lmoot

So here’s my story about 0% interest. After our paid for van gave up the ghost at 13 plus years. I went to purchase a new van. I had the cash in the bank, worked a deal and paid for it out right think yeah got the van that works for our family. I had every intention of maintaining it and driving it also for 13 plus years. Van was in an accident 28 months after I purchased it.Van was totalled and written off, lucky to be alive! I had insurance that if an accident happened with in the first… Read more »

SavvyFinancialLatina
SavvyFinancialLatina
6 years ago

When we were buying our house, our realtor kept referring to how our monthly mortgage payment wouldn’t change very much if we paid an extra $5K. The banks kept telling us the monthly payment wouldn’t change very much if the interest rate increased by x points. But it does! We should have tied down our interest rate one day earlier, but instead we were afraid and waited. Difference in totally payment? $1,000. That’s real money! If you actually look at how much you’ll be paying over a period of time instead of one transaction, you suddenly see the huge difference.

Nick
Nick
6 years ago

I hate debt and always pay in cash. Being in debt for me is being in someones pocket. It just does not make sense.

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago

Normally I avoid debt. I use credit cards but don’t carry a balance. But I bought an iPhone in November (my old phone died), and I had the option of paying cash, or paying it off interest-free over 24 months. I was totally planning on paying cash (“I’m not the type of person who finances a *phone*, for goodness’ sake,” I told myself). But when it came to actually forking over $650 in cash, I couldn’t do it. Holly is right–it was too painful! So, now I’m paying $27 a month for the next two years. At any time if… Read more »

Ely
Ely
6 years ago
Reply to  Ramblin' Ma'am

The key phrase is ‘interest-free.’ We also have t-mobile, and the question came up when we upgraded to smart phones. You can get the discounted phone + higher monthly rate if you want it – at least you could then – or you could pay off the phone slowly like you did. (And we did, ultimately.) I can see the benefit of the discounted phone if you change phones often; the monthly fee will never be more than you would be paying for the phone anyway. But when you keep your phone forever, like I do, then the lower bill… Read more »

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago
Reply to  Ely

Yep, that’s how I am too. I basically run my phones into the ground, so it made sense. This is the first time I’ve had a “hot” new phone–I had a flip phone until 2011. I’m enjoying it while it lasts. In a couple years, everyone else will have the iPhone 7 and I’ll still have this 5s.

Tina
Tina
6 years ago

We too were like you. Bought new cars every couple years until we realized how much we spent every month on cars. All of our cars are paid off(last payment Oct 2013), in fact got one car from bartering and it works perfectly! We promised to use them until we couldn’t anymore too. We have 3 cars(have two teenage drivers) and pay less for them than we we had 1 car. Insurance is higher but that is expected. We now split the money we had on a car payment into ER savings, Vac savings, Car savings and into kids 529… Read more »

Sarah @ Little Bus on the Prairie
Sarah @ Little Bus on the Prairie
6 years ago

It’s seriously unfortunate that so many of us don’t realize the consequences of debt until we’re up to our eyeballs in it. My husband and I have paid off of $20k in the past four years and it’s been painful at times, but I’m glad we learned the lesson early on in our marriage so we can have so many years ahead of us of debt-free living.

Alea
Alea
6 years ago

Awesome article, always a good reminder that “Cash is King”. I live by one rule these days: “If I can’t afford to pay for this in cash, I can’t afford it”. And by cash, I mean no monthly payments. I pay via credit card, but I know when the bill comes due, it will be paid in full. If I can’t pay for the item in full, then I simply wait and save until I have the money. It always amazes me that people are willing to go to a Rent A Center store, and pay through the nose, because… Read more »

Tyler Karaszewski
Tyler Karaszewski
6 years ago

I have a financed boat. And I gave them a check for $12,000 of money that “was earned with my own blood, sweat, and tears” as the down payment when I bought it. It didn’t hurt, because I wanted the boat. Would it have been cheaper to pay cash for the boat in the long run? Sure. It would be a *lot* cheaper to not have a boat at all. There are lots of things that would make life cheaper. But there is an opportunity cost to avoiding debt, as well. If I had waited 3-5 years and paid cash… Read more »

nicoleandmaggie
nicoleandmaggie
6 years ago

Yeah, it’s really too bad that people can’t rent boats. (And thank goodness for statutes of limitations on debt collection.) Not to say that it doesn’t sometimes make sense to buy on credit instead of rent if the interest rate is good enough etc. etc. etc., but this false dichotomy of people who are responsible with their finances never having any fun is ridiculous. There’s plenty of fun without financing things we can’t afford, and not financing things with high interest rates means it’s easier to afford whatever we want later. So, yes, the terms of the debt and the… Read more »

Tyler Karaszewski
Tyler Karaszewski
6 years ago

You are not a kill-joy for renting a boat. You are a kill-joy for telling me that *I* shouldn’t finance a boat because then I’m irresponsible and really I should just do free things for fun like hike and get books from the library, because nothing else is frugal enough. And I did not say that *you* did this, I just said I see it a lot on sites similar this one. And no, boats are not a good investment. They depreciate. They do not depreciate nearly as fast as some other things you could spend your money on, like… Read more »

Laraba
Laraba
6 years ago

You could argue that buying a house has similar issues — if you use a mortgage, I mean. There was a time when I thought maybe we should stay in our smaller house until we could save up to buy a house outright but that would have meant stuffing our increasingly large family (we’re up to 10, going on 11 right now) into quite a small space. So we moved into a BIG house and yes, have been paying interest for years. You thought through the boat and decided to finance it. I think that is different than people who… Read more »

Elizabeth
Elizabeth
5 years ago

Like your thinking, Tyler. For one reason because I know the pleasure and joy of sailing, too. I’ll say this that around Seattle, if you take sailing lessons from some marinas, you can get access to a fleet of rental boats to sign up for. One friend of mine developed groups of peeps interested in going sailing/learning to sail who would split the costs for a day out on the Sound. Pretty cost-effective way to get started, enjoy yourself, and figure out what kind of boat will eventually win your heart. 🙂 Thrift doesn’t HAVE to be all doom and… Read more »

Carla
Carla
6 years ago

Beautiful boat! (I’m a bit of a speed demon).

Loretta
Loretta
6 years ago

There is a lot of phychological forces on how we deal with money and debt. I also have the opposite mindset of this article, even though I am extremely debt averse. For me, putting something on a credit card means borrowing against my future, and because of that, when I use my card I think twice before charging anything. If I have cash on hand, I spend it without thought, which leaves me short for thhings like a mortgage, and because of that I give myself a very strict cash allowance. I put everything I need on my credit card,… Read more »

Dan Stelter
Dan Stelter
6 years ago

Have been following the content on this site for quite some time now, and finally commenting. One question I have, is I’d be wondering how that $11.2 trillion in debt breaks down. For example, my wife and I are getting our asses kicked a little with medical debt, which is no fault of our own. If your health falls to pieces, you have to go to the doc and we only go when it’s really bad. And we’ll have a mortgage soon too. Got student loans right now, and that’s it. I wonder if people really are responsible, as would… Read more »

BD
BD
6 years ago

To be fair, the author should not say “We all can have whatever we want,” because that’s simply not true. Many of us don’t even qualify to get things on credit, because we don’t make enough money per year.

Lenders aren’t stupid…they’re not going to finance a $50,000 car to a person who only makes $5,000 a year.

Which is a good thing, for both lender and borrower.

lmoot
lmoot
6 years ago

I think that the idea that cash gets you better deals (at least when it comes to mainstream dealers) is a myth. I’ve found the opposite to be true. Most dealerships are sad if you pay cash for a car, and they’re not going to give a deal on top of that because you’re losing them money by not financing and paying interest, or in the case of 0% financing you’re not letting them get their referral credit through the lending bank. Traditional dealerships could care less about your cash because they get paid up front through a 3rd party… Read more »

Hope
Hope
6 years ago
Reply to  lmoot

Having never bought a car from a dealer, I can’t say you’re wrong, but I will say cash definitely helps if you’re buying a car from a private party (Craigslist, classifieds, family friend, etc). I saved $1500 off the price of my current car by telling the owner–honestly–that they could either have 6K in cash, since that’s all I had saved up at the time, or I could go to the bank and fuss with mortgage paperwork and title transfer to try and get them their full asking price. They took the cash, and I got a great deal on… Read more »

Jacq
Jacq
6 years ago

I used my LOC about 6-7 years ago when I bought my motorhome. I had the funds invested in a taxable account, didn’t want to sell/withdraw them and take the tax hit or not be invested in what I was right then. I’d saved up a little over 1/2 the purchase price (~$53k) but had come across a fantastic deal on the net on a new one that was priced about 30% higher here vs. where I bought it from. So I took the plunge with no regrets. Having said that, I was manic about paying that LOC off. Think… Read more »

Dawid
Dawid
6 years ago

Government have an interest in no cash transactions. That’s how they can better controle people.

valerie
valerie
6 years ago

My husband and I went on a cash only diet a few years ago…we paid off 3 credit cards, a car, a boat and almost have our house paid off. The house is now the only thing we owe on and it’s amazing how much money we have (for our savings) since we have been paying cash…we also play this game called “do you really need it, or just want it? If it’s a need, then if we have the cash to buy it, we usually will(like last year, we pulled 6000.00 from our account to pay cash for a… Read more »

Erin
Erin
6 years ago

We paid off our last credit card (woohoo!!!) and committed several years ago to paying cash for everything. However, now we’re ready to buy a house and can’t because we have no credit accounts and had a job loss/medical bills wreck our credit. I nearly had a stroke when I found out that paying that stupid card off and closing it cost me 50 points on my score. What do you do?

Baruch
Baruch
6 years ago

I agree with it all. We are almost debt free and at this point it just doesn’t make sense to pay off what’s left since the interest left is more than the prepayment penalties. We have no credit card debt. My wife and I live on very little income but we are conscious of all spending. We value every small amount of money that leaves us. Also we still use credit cards for the ease of use but they are paid off each month in full with no exception. The key is like was said, to put everything in savings… Read more »

noname
noname
6 years ago

“Paying in cash might help you spend less — When you force yourself to pay in cash, big ticket items start to lose their appeal. Try walking into a dealership with the intention of paying $15,000 or $20,000 for a newer car. All of a sudden, the prospect of keeping your old paid-off junker becomes an incredibly attractive option. Am I wrong?”

Skimmed down to that part, because the paying with cash thing was why I started to read….. the answer to your question is… Yes, you are wrong.

Joti
Joti
5 years ago

Since I’ve been on Dave Ramsey’s plan and doing the debt snowball, I’ve realized a few things after knocking out some debt. Cash equates to a clean and simple life. When you pay cash, the transaction is over and you never have to think about it again. That’s why I haven’t used my credit cards in over 5 months. I feel sick to my stomach even thinking about making a purchase on those cards. When you pay cash, you are done. I like that.

Jaya
Jaya
5 years ago

I am about to pay for a newer used car with my hard earned cash. It does hurt to see my bank account get reduced in half but I know it is worth it in the long run. I did FPU and learned a lot. I also hope to advance in my career so that I can make a lot more money that I know I can.

hayley
hayley
1 year ago

i pay cash for everything because for some reason having NO debt means are a bad risk…well how are u supposed to get a loan or establish credit when a dept. store turned me down and state farm credit card, even though i have been a customer for 24 years and paid every bill in cash on time every time

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