Living the Cash Only Life

It’s no secret that one of the worst types of consumer debt to hold is in the form of credit cards.  Despite the increasing savings trend since the economic fallout, the average household still carries an average of $14,743 of credit card debt.  What’s even worse is that those credit cards carry an average interest rate of 14.83%.  I’m not saying that credit cards don’t carry their fair share of benefits like fraud protection, travel insurance, and in some cases generous rewards programs, but they carry a great deal of risk for those who can’t use them properly.  For some people, the cash only life is the way to go.

“Personal finance is 50% psychological”, I’ve heard and agreed with this phrase on more than one occasion.  You know the rules, don’t spend more than you earn, don’t pay interest, buy a used car, keep a six month emergency fund, etc.  However, I’m willing to admit that many of us don’t hear adhere to all of this advice.  Sometimes you have to simply take one step at a time, and that first step should be switching to a cash only lifestyle.  Using cash for all of your purchases creates an attachment to your money that you won’t experience using plastic.  For some reason, people don’t often correlate a credit card purchase with an actual outflow of cash, as if they were using monopoly money to buy that item.

Consider the “think before you spend” motto that many of us bloggers tout.  You go to your local Best Buy, or Google shopping as I often recommend, and you find that $2,000 LED 3D television that you just have to buy, but you dont’ have the available cash to purchase it.  By simply not using a credit card to buy that television you are forcing yourself to think twice before that big purchase, and the possible interest that could come along with it.  Impulse shopping is a serious no-no in properly managing your finances.

We all know that a budget is a necessary tool for saving money and avoiding debt.  The beauty of paying with cash is that you can never spend more money than you earn.  This is one of the best tools in keeping with a budget.  Though you may save less than you desired, or spend more on entertainment or food than you allocated, you will never spend more money than you have.  Despite what many think, having a zero net worth is much better than a negative one.

I once had issues with overspending on my credit card, and though I haven’t paid credit card interest in quite some time that doesn’t mean I haven’t utilized my card on several occasions.  Even paying off your credit card on time doesn’t always mean you are being financially responsible.  As I said before, people detach the bond they have between cash and purchasing when they use their credit cards.  I have slowly weened myself off of using credit cards, but those air miles, and 5% cash back promotions keep luring me back in! The cash only lifestyle isn’t a necessity for everyone.  Though if you have a credit card balance, or a history of paying finance charges, it may be time to reconsider your spending habits.

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30 thoughts on “Living the Cash Only Life

  1. Katharina

    Great post! We’ve been doing the cash only lifestyle as much as possible and it was so good to switch over to it a few years ago. There are still a few places that insist on credit card payment and I do a lot of Amazon and other online shopping but I pay the card in full every month. It has made such a huge difference.
    –Katharina

    1. admin Post author

      That is a good point Katharina… I actually think shopping on Amazon and other online sites can save you a ton of money on stuff you are going to purchase anyways. Some people have prepaid debit cards to mimic cash in this situation, but if you can keep a handle on it then a credit card is appropriate for situations like this.

  2. Jeffrey Trull

    I’ve been putting much more thought into this lately, too, and I think I’m going to give it a trial run very soon. I think there are many good reasons to go cash only, and some people don’t even recognize them.

    1. admin Post author

      I would say a trial run is definitely worth it! I think you will be surprised at the results.

  3. Hunter

    The cash test is a good one. I agree, by simply asking yourself if you havevthe cash available to make a purchase, is enough to defer many buying decisions, and this is healthy for your net worth. Nicely put Justin.

  4. Dave @ Money In The 20s

    Good advice on going to a cash only lifestyle. I think a lot of people that struggle with debt should consider making this change. Like you said, you can’t spend more than you make if you are paying with cash.

    That said, I know that I will probably always utilize a credit card. I try to create an attachment to my spending when using a credit card by tracking the spending immediately.

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  12. Matt Wegner @ Financial Excellence

    Great advice. My wife and I have been credit card free for six years now and we pay cash for everything we can (debit card for everything else). It’s so easy to overspend with plastic, even if you pay it off every month. I’m glad to see someone else saying it too!

    1. admin Post author

      Wow 6 years is truly impressive….do u have a debit card that provides rewards?

  13. Jeff

    I would like to be debt free. I agree with the cash only lifestyle. Of course sometimes you have no choice but most of the time you do.

  14. Paula @ AffordAnything.org

    I’m definately NOT a fan of the cash-only lifestyle; I think you’re forgoing an opportunity for “free money” in the form of rewards when you do this. If you really feel like you can’t use a credit card responsibly, then go cash-only. But if you’ve never been in credit card debt, then I say, use a credit card. You’re probably not going to go to restaurants more frequently because you’re paying with plastic.

  15. Amanda

    I think you gave good advice about credit cards because they usually charge you so much interest. If you have the cash to pay for something, why pay interest on it, you’re just paying more? I’ve learned to only spend the money that I have at the moment, if I don’t have the cash, I don’t need it. My fiance is also the same way, neither of us have credit cards. He just recently purchased a brand new truck with cash, so he won’t have any car payments to make that charge interest.

  16. Cindy M

    My hubby and I get by with Debit cards-and I belong to a few customer loyalty reward programs that DON’T require a credit card- pricechoppers, for instance.Cash only is great for smaller purchases- which we often do when we eat out occasionally.

  17. Judith

    I live a cash only lifestyle because, where I come from (Israel), credit cards don’t make financial sense. The bank where you maintain your bank account issues the credit card to you, automatically pays off your credit card on time once a month and charges transaction fees, maintenance fees and insurance fees for so doing; whereas, no fees are charged for using a bank debit card to withdraw cash from one of the bank’s many ATMs.

  18. Mari

    We have adopted a hybrid version of the cash lifestyle. We now only use our credit cards for gas or rarely, for an unforseen emergency, and then we pay it immediately.

  19. Ilissa

    I have frequently thought about switching to a cash budget but with receiving the rewards we do on our credit card, it is difficult to make the switch. My husband and I are pretty good with our credit card and pay it off every month so we never have to pay interest. In the end, they pay us to use the card. But I do admit that because we use a card instead of cash, we probably spend more than we should.

  20. Julie L

    Thoroughly enjoyed this post and this quote:“Personal finance is 50% psychological..this is so true…your article really hit home…My dad was a person who never had a credit card and always paid cash….and was very successful at it

  21. kari jasus

    we try to do this, using our debit card. but it is very difficult as it is a complete life style change for us.

  22. Nick H.

    I learned in my early 20′s about using cash only after racking up a few credit cards and having them rake me over the coals with high % rates!!!

  23. Jessie C.

    Great post. I’m forwarding this to my sisters. We have been trying to use more cash and less credit cards for years.

  24. Jessica Dempsey

    I’ve tried to stay away from credit cards as much as possible. I signed up for one while I was in college, and that’s the only one I’ve ever had. I plan to keep it that way! I’m also trying to pay off the balance and increase my savings so that I never have to rely on it again.

  25. Susan Smith

    Great post we stopped using credit cards about 10 years ago and now only use our debt card or cash. We not only don’t have to pay the interest charged on the credit cards but we have to stop and think before we buy something and make sure we have the money in the bank before we buy and therefore we spend less money.

  26. Kendra Gillilan

    great post–we are living cash only as we were following debt free living and it has been a long go , but we are at the end!

  27. Elisabeth

    Controlling spending is clearly a different beast for every person. The best method I’ve come up with to enjoy credit card rewards while monitoring my spending on entertainment (which I conclude is anything outside of insurance, food, transportation, and shelter) is to pay cash for entertainment and put my necessary bills on my credit card. The card gets paid automatically every month, savings are automatically deposited into my savings account, and I only spend the cash I have designated for fun. Simple, effective, and got me out of debt.

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