Cash is King! I heard this phrase countless times from my father’s business friends. They would love it when a customer would come into one of their stores and pay for goods or services using cash as opposed to placing the purchase on a “store credit account.”
My father and his friends understood the importance of money. It was immediate, and they didn’t have to wait a predetermined amount of time to get paid, nor were they going to have to wait for payments to come in monthly from the customer. Getting a customer to pay in cash, in full was priceless to them. Cash was king.
Today, in a world that revolves around credit, cash is still an important tool for managing one’s’ personal finances. In fact, if you’re in debt and this year you’re considering doing something significant to reduce your debt and pay off your creditors, you’ll want to make this one big switch.
Using Cash Only Is Crucial When Getting Out of Debt
You Spend Less Using Cash Only
I don’t know if you care why this happens but you should. You naturally start spending less when you have to fork over your hard-earned cash and watch it slip into the register. A recent study found that individuals typically spend 12-18% more when they use credit vs. cash.
Something happens when you hold cash in your hand. You begin to rethink purchases, look for better bargains, and just naturally spend less money. You have a connection to money that’s missing when you pay with plastic. It’s personal; it feels like it belongs to you, and as such you care for it in a way you don’t when you use credit or debit cards. The longer you use cash, the stronger the bond.
Some believe they’ll blow all their money if they carry cash.
While this is certainly a possibility, you’ll do this once and learn the hard way that developing a spending plan is the way to manage your cash, so you don’t find yourself broke. Converting to cash might take some time to adjust, but believe me, you’ll make the adjustment quickly and learn to manage the money you have on hand.
Using the cash envelope system or some other system is a good way to get started.
Only Cash Gets You The Deals
Remember my father’s friends? How many sales do you think got made for people using credit? Not many.
How many with cash? Plenty.
They were more than willing to wheel and deal with the folks who came to the table with cash.
There’s something magical about cash and it makes salespeople do crazy things. As the customer, you end up with excellent deals. Next time you’re in the market for a big purchase, bring your cash and see what happens.
Cash Only Is Simple
My nail tech only allows tips in cash. When he posted that new policy in the shop, customers went crazy because it meant they needed to remember to carry cash with them or their nail tech would be without a tip.
Guess what started happening?
People started paying for the entire transaction; tip included in cash. Some sales that occurred via credit or debit card dropped significantly. The nail salon owner was happy as he preferred cash over credit purchases because it meant more money in HIS pocket, and eventually the customer got used to the new system.
Paying with cash is just straightforward. You take it out of your wallet, complete a transaction, maybe get some change and go on your merry way.
Only Cash Helps You Better Understand Your Wants and Needs
When you spend your entire adult life using credit cards to purchase everything and anything, you begin to lose sight of the difference between what you want and what you need.
Using cash helps to rebalance your thinking in this area.
You begin to learn why you need to pay the mortgage and your desire for a new pair of shoes can wait. You put your needs above your wants, possibly for the first time in your life, resulting in your needs being met.
No more fear of foreclosure, no more fear you can’t pay the rent, no more fear the lights will be turned off. You are putting your needs front and center and learning to save for the wants.
Only Cash Keeps You Out of Debt
When you make the transition to cash, you suddenly realize you’re taking control over your financial destiny. Not only are you paying off debt, but you’re not creating any new debt. With each purchase, you make you can go to bed at night knowing you kept to your goal to get out of debt and stay out of debt.
That’s a beautiful thing.
Is Going All Cash for You?
So now that I’ve outlined some of the reasons you should consider going to all cash you’re probably wondering if you can do this or not. Here is the deal: you need three things to be successful when you transfer to using all cash.
- Discipline: It takes discipline to make the switch and stay there. Be prepared for the transition to take up to a month before you’re entirely comfortable with using the cash only system. You may revert to your old ways if you don’t keep this commitment front and center.
- A Spending Plan: I’m a huge proponent of spending plans and budgets but if you’re planning on making the switch to cash you’re absolutely going to need a spending plan. If you don’t take the time to construct a plan that works for you and your family, you may find yourself spending the cash you do have on hand recklessly. Sit down and formulate how you’ll use the money, what you’ll pay for in cash and what will still need to be paid in some other way. Without it you could find yourself in trouble.
- A System: Dave Ramsey teaches a simple and basic envelope system to keep track of your money and where it’s going. The easy and simplicity works, and I highly recommend it when using the cash only system.
Using cash is a smart way to gain control over your spending and ensure all your bills are covered each month. If you’re on the fence, why not give it a try and see if it might be right for you?
From this point on you know, you’re making wise choices. You’re looking for bargains, evaluating your purchases and paying with cash.
The only thing you need worry about is to ensure you get to the bank for your weekly allotment of money.
It’s all uphill from there.