Why Pay Cash?

Recently, we purchased a new-to-us suburbanWith cash.  It’s almost un-American, I know, to not take out a loan for such a buy.  (And seriously, don’t get too excited.  It’s a 2005.)

Truthfully, our last vehicle purchase was in 2003 and we took out a loan then (and paid it off in less than a year) because we 1) didn’t know any better, 2) needed a vehicle, and 3) didn’t have the cash saved up all at once.  It happens, but we’d like to think we’ve learned a thing or two since then.  Here’s why paying with cash is now a priority for us.  

Value in Delayed Gratification

Paying cash for an item often means we have to wait for it.  Waiting gets a bad rap, but it’s a good thing!  It took us a few years to save up that money, and by doing so we likely took better care of the vehicle we had to make it last as long as possible.  We also had plenty of time to strategize, research, and make sure we were buying exactly what we need and want.

In those years we were also able to look at our savings when a spending opportunity came along and ask, “do we really need this?” as we focused on our goal.

Goal for Saving

We all know that saving money is important and something we should do automatically, but without a concrete goal in mind for that savings, it’s easy to lose sight of the purpose and fall prey to spending whims.  Expecting the expected gave us a goal for our savings, as we knew that that our family was growing and our van wouldn’t last forever.

Having money earmarked for a specific purchase helps keep the momentum going.

Security

When purchasing an item, any item, with credit, there is risk involved.  Paying cash gives us the security of knowing that if a financial emergency occurs, we don’t have to worry about how we will make the next payment.  There are no payments to make!

No Wasted Money

Interest payments make me ill.  I clearly remember the day we signed a bazillion papers to buy our first home with a 30-year loan (stupid).  Our realtor said “Don’t look at the total here.  It’ll just make you sick.”  Ummmmm, yes.  What a waste!  It can’t always be avoided, but I can think of about a bazillion things I’d rather do with my money than pay interest.

Start Saving for our Next Goal

Because we’re not wasting money on interest payments, we can immediately direct all “would-be-interest” funds to a new savings goal.  Braces for the second-born, a new basement, a new heating/cooling system for ours that is on its last breath during a scorching summer, bathroom/kitchen remodel, replace the pickup?  (We have lots of choices!)  ;)

It Feels Good

Writing a big ‘ol check.  Forking over the cash.  I’ll admit it, I had a pit in my stomach.  But still, it felt good.  Our vehicle was paid for before we left the lot!  Working together toward a common (hard!) goal is good for our marriage and motivates us to continue to do big things.

Paying cash isn’t always possible.  I get that, and we could totally be there again someday.  However, with the right mindset and a healthy dose of discipline, it often can be done!  The rewards are many, so we’ll strive for it again.

What was your biggest cash purchase?  What motivated you to get it done? 

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Comments

  1. Congratulations on the new-to-you vehicle. Though you are not a big fan of using cash for day-to-day operations, saving and paying cash for large ticket items may be the key.

    I’m not an all or nothing type. Using cash for big items and then building rewards with credit or debit (without paying interest) is compromise I choose to live.

    Keep up the good work and enjoy your suburban.

    • I need to write that post eventually… after I decide how I really feel about the day to day cash spending. (IF I ever decide – ha!) And you’re right about the all or nothing thing. I call it “never say never or always” but it’s the same thing. There are just too many variables in life!

  2. Good for you!! I hope by the time we have to replace our little kee-kee (the kia) we will be able to save cash.

    Right now, our main goal is getting out of debt (no credit cards, but paying off our house) so we don’t save as much as we should for a new car. But we do save a little something and that’s better than saving nothing at all:0)

    • “we do save a little something and that’s better than saving nothing at all” Absolutely! That “little bit” may help out with an emergency or two so that you can keep your momentum on your other goals!

  3. Woo hoo! Good for you! Well, we paid our portion of C’s 750K hospital bill with cash, but insurance helped a LOT with that one. ;) We “financed” our last new car (my minivan), but gave them a check the same day. The simple truth was that the finance guy was able to throw in all sorts of extras and goodies based on our credit that we may not have been able to negotiate without his involvement. In this particular case, he had a lot more power than the sales guy. But, seriously, we handed them a check before we even left the dealership. So we never had a payment on that vehicle. Not sure if that really counts as “using credit” or not.

    • That’s awesome! We’ll have to remember that when we go to get our next truck in a couple years!

    • “We “financed” our last new car (my minivan), but gave them a check the same day.” I totally consider that the same as paying cash, and would’ve done the exact same thing in your specific situation. :)

  4. Last year we bought a used 2010 Honda Odyssey with cash. We saved for over 2 years to get there! Our goal this year was to save enough cash to be able to sell our home (we knew it would be a loss). We are an active duty military family and are moving soon. While very difficult, we sold our house and had the cash to cover the loss. Praise God. Now we are completely debt free and living on base while waiting our orders to move. Such a freeing feeling to be able to go wherever God calls and not be “tied” to debt. Now to rebuild the fund… :)

  5. We’ve learned (the hard way) that cash is best for us too! We’ll be paying for our next cars or any other major purchase in cash and that sounds amazing to me! It’s also teaching our boys about making choices and spending wisely!

    You guys are an inspiration!!

  6. Paying with cash leads to a satisfaction that no card could ever compete with. :-)

  7. Since following the Dave Ramsey Plan and paying off debt (except for the house – still working on that!) we have paid cash for 2 new-to-us vehicles (a 2002 Honda Odyssey and a 1998 Nissan Maxima!) and are now in the process of renovating our kitchen – all being paid for with cash! It has been tough but we have kept our goals at the forefront and it has helped us spend wisely and look for great deals. My husband has even been able to barter for some of the work – he is a techy and has helped with a general contractor friend’s business website in exchange for some free and reduced labor cost on the project. We are in the home stretch on the kitchen! I can’t wait to see it all complete and more efficient with more counter space and an island!

  8. Our biggest cash purchase was a car. We paid cash for dh’s new-to-us car ($13k I think). Then 1 year later we needed to replace our van. Having saved for a whole year (we had hoped to wait longer) we did have $10k to put as a down payment, but we still had to take out a loan for the balance. It really frustrated me, but we felt stuck and did the best we could.

    Since then we have paid cash for 1 set of braces and are about to fork it over again for set #2. #3 and #4 will be following in a few years, ugh! It feels awesome to pay cash for large purchases! So much less stressful than signing papers and owing money with big monthly payments. Once braces #2 are paid for I want to concentrate on a car replacement fund for a bit before tackling braces #3, but likely it will be a shared fund for whichever comes first. We are waiting on 1 tooth to come in before beginning. It is currently set to come down in the roof of his mouth and will have to be moved over once it breaks through. Ugh! Teeth might be our downfall financially over the next few years.

    • Ah, yes. We’ve “what if’d” our remaining savings to death, and realize that we could be in that same position if things start to crumble, which they always could! Praying for a little “spacing” of necessities. :)

  9. Our biggest cash purchase was building our house about a year and a half ago. We’ve been married 14 years (I’m 35, he’s 36) and have always lived below our means. We set up our first budget before we were married and carefully decided how much we could pay for rent and all of our other bills right out of college. I had $18,000 in student loans that I paid off my first year of working. We decided early on that we would try to only live off of my husband’s income if possible so that it wouldn’t be such a lifestyle change when we started having children and I stayed home with them.

    We bought our first home in 2001. We took a loan out for that home, but had a big down payment, and planned to pay the loan off as quickly as possible. In 2003, we had our first son, my husband had a job change, and we moved to a new city. We decided to buy a house that was slightly less money than our previous home and paid cash for that home. We were completely debt free by age 26. In 2007, we adopted a little boy from China. In 2009, we adopted another little boy from China. In 2010, we built our home. In 2011, we adopted another little boy from China. I share all of this because it is fun to look back over the last 14 years (we celebrated our anniversay this week) to see what budgeting, giving, and hard work has looked like for our family. It is not instant and it isn’t always easy, but it is worth it! We continue to live below our means and save. No cable and I don’t even have a cell phone (but I think I might cave and get a basic one soon)! We are excited to see where the Lord will lead us in the future.

    We love the Crown Financial bible study. It was life changing even though we were already budgeting (or using a spending plan if you don’t like the “B” word).

  10. We just bought a new-to-us, much needed, minivan (well back in April) and we were able to pay cash for it as well. It took several years of saving up and also the trade in on my liberty, but it was well worth it to not have a monthly loan to pay. We may not have a brand new, top of the line, with all of the extras vehicle. But we got what we needed and wanted with no loan and that to us is the better choice.

  11. Thanks for sharing this Amy and for your family’s example of good stewardship. I’ve been on the flip side most my adult life, with Alec being an auto dealer. When I was helping at our used lot, before he started managing the Ford dealership – we saw many financial veriables. It was always refreshing to have those come through the door that paid cash & some, quite literally. Ever haul $12,000 cash to the bank – felt like I needed to be in an armed vehicle. The advice my Alec often gives is to keep making that “car payment” to yourself after the vehicle’s paid off. We had a few repeat customers that did this & it was always like a celebration when their deligence paid off & they came in to buy that next vehicle! Good things come to those who wait ;)…

  12. Ugh, this whole time you’ve been on your cash experiment we’ve been messing up! Hubby switched to day shift losing his shift differential pay AND had a long stint of no overtime. BUT WE CONTINUED TO SPEND THE SAME!! So stupid! Now we have credit card debt for the first time in our married life and it leaves a sick, sinking feeling after each bill pay session that just hangs there. I don’t think people who live in debt even realize the weight…I didn’t until my single life debt was gone and we lived with only our mortgage. It’s so freeing. Now we have to suck it up and dig back out. BLECH!

    • You know what, though? That sick, sinking feeling is a GOOD thing! It means you CARE, and I bet you’ll get it turned around quickly!

  13. We have always paid cash for our cars; all have been new to us. Love not having a car payment to worry about! Even when we had to pay $1300 in car repairs today, it’s still worth it. No debt here except mortgage, and we have almost twice as much equity as we owe. We are about to tackle a small house renovation project, all with cash also. It’s God’s money, not ours. We are not as good stewards as you, but we are trying.

    • Oh, most definitely not a competition. ;) We can only give God the glory for our paid for house. A series of VERY fortunate events (selling our house in the “suburbs” right BEFORE the economy tanked, finding a fixer-upper in a tiny town for just over 1/2 of what we sold for…) that’s not us at all! You’re so right about it being God’s money. If we all focus on that and do our best, good things will happen!

  14. We paid off our remaining debt in early 2010 (except a house in Colorado that we don’t currently live in – military…) and it has been SO freeing. We purchased a new-to-him car for my husband early last year and were able to pay cash for it! A few months ago were also able to put a huge chunk down on our son’s orthodontic work – the rest is on a non-interest payment plan through the orthodontist and I’m on track to pay that off several months early! We are now more than half way to saving what we will need to purchase a new vehicle to replace my van. We’re hoping we can get at least another year out of it so that we’ll definitely have enough saved for it.

    Funny story: A couple of years ago, my aunt and uncle purchased a small cabin on a creek in a rural area in Arkansas. Well, when they were at the closing for it (paying cash), the closing agent repeatedly asked them where they got the money/who loaned it to them. My uncle had to explain several times that it was HIS MONEY that he’d been saving. He said, in the end, it was still like she almost didn’t believe him… So sad that society has gotten into such a “borrowing” mentality that honest, responsible people who have saved large sums of money get questioned about how they acquired the money.

  15. Way to go! We have been on the Dave Ramsey plan for a couple years and getting closer to being debt free, but seems like it will be forever still! My car will probably not last till we have enough cash saved for a new car (we are not saving now as we are dumping all extra cash on debt) so we will have a decision to make in a few years!

  16. House and cars are paid for in full. We just bought new vehicles and the dealership didn’t know what to do without a loan and ended up having to refund us loan fees they charged us by mistake. I don’t have credit cards either.

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