Last week Amazon announced it would be purchasing Whole Foods Market. While this is not a big deal to me, what does strike me about the news is that Amazon is paying CASH! This started the wheels turning in my brain about the power of cash – not Jeff Bezos’ cash, but the power of MY cash.
When Dave Ramsey opens a new segment on his radio show he states, “Debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice.” I don’t always agree with Dave 100%, but when you really think about this he’s right – cash is king and debt is dumb.
Pros to paying with cash: Lots!
Cons to paying with cash: Hmmmm…..none?
It is cheaper to buy things with cash
Debt: When you finance anything you pay interest. Debt means your hard-earned cash is paying for something you bought yesterday plus the interest you owe. You lose that bargaining power for the future. This seems simple enough, right? So why do we still finance stuff with credit? For me it is usually because I don’t have the cash to purchase something outright, or I don’t want to wait to save the cash to buy that item. I am learning patience, but man it’s tough to be patient and tell myself NO.
You spend less with cash: When you use actual cash instead of swiping a card (either credit or debit), you have a limited supply of cash available to you at that moment. If you have $100 to spend in cash at the grocery store, you can only spend $100. If you swipe a plastic card, you don’t have to be as mindful. You can spend $150 or $100.25, and both of these are still over the $100 cash purchase!
Vehicles: Mr. Dreamer lost his job last year and we needed to dump our monthly truck payment of $550 ASAP! We ended up selling the truck to a well-known car retailer. We probably could have sold it for a little bit more on Craigslist or somewhere similar, but, again, we needed to get rid of that $25,000 debt ASAP. We ended up taking out a personal loan (ugh!) and bought a used Toyota from a private party. While our personal loan was definitely not cash (and not really the point I am trying to make here), we got a better deal on the used car we purchased because it was kind of like cash (Monopoly money, actually!) and gave us some bargaining power with our purchase. A private party purchase is usually much cheaper than going to a car dealer.
Mortgages: When the time comes to sell our house, if someone offers cash we would strongly consider that option before any others. In our current competitive housing market cash certainly is king! The cash buyer has more bargaining power, deals close faster, and there is usually less red tape and hassle. On the flip side, paying for a home in cash is our ultimate goal. To not have a house payment in our retirement is one of our biggest dreams!
Cash means less stress
Emergencies: Life happens. Cars breakdown, water heaters blow up, unexpected health issues arise. The stress of these things are bad enough, but the piece of mind of cash in an emergency fund can alleviate a lot of that stress. Most finance experts say you should have three to six months of income saved for emergencies.
Retirement: Cash saved for retirement means less worry and more fun for retirement. We really don’t want to depend on Social Security when we retire because it’s just not enough to live on comfortably and there probably won’t be any money left for us anyway!
College: Most parents want to help their kids pay for college. Cash in the bank means no student loans for the kiddos! But make sure you first fully fund your retirement before saving for the kids – they can finance college, but you can’t finance your retirement.
Following your dreams: A lot of us have jobs that we don’t really love, right? It would be so cool to get up every day and be excited about my job! I recently finished the book The Crossroads of Should and Must: Find and Follow Your Passion by Elle Luna. She talks about getting rid what we “should” do in life such as working a job we don’t like in order to pay the bills and replacing it with what we “must” do in life which includes our passions and things we love to do and really want to do. Doing what you love could ultimately turn into paying the bills with the added bonus of loving your job! This would be much easier to do with cash in the bank and no debt.
Cash = Freedom
Many of us have debt – lots of debt. And most of us know this is not a good thing. It is hard to plow through the debt and pay it off. We have to sacrifice and do things we really don’t want to do and do things most people aren’t willing to do. But in the end it’s worth it because cash gives us freedom and don’t we all want to be free?