Tuesday, July 22, 2008

Cash Is King!

Bob Dylan once sang about "Times They are a Changing...". Well is seems they really are. It is funny to hear Americans talking about cutting back or saving money - at least not from my generation. My grandparents were of course, experts on saving money and being frugal. My grandmother always said if you can't pay cash for it...you can't afford it. She is right! (Aren't all grandmothers?)

Why is not being able to buy something if you don't have cash for it important? Well the amount of cash you have determines how wealthy you are. Possessions, for the most part, depreciate (that means they lose money over time). A car is a perfect example of this...as soon as you drive a new car off the lot they say you lost 20% of its value. Hell even houses are depreciating in some parts of the country...well not really...they were just totally overpriced to begin with. Right now cash is king and for good reason, people don't want to use their plastic anymore. I was never a big fan of credit cards...I do have an American Express, have had one for years, because I like the fact it needs to be paid off each month. I barely use that now.

The simple fact is when you pay cash for something you are paying the "today" value for it. I say this because the value of the dollar fluctuates and inflation can play deceptively with prices. Paying for something with plastic, especially something consumable like food, is a recipe for disaster. Not only are you paying for something that you won't even have by the time you finish paying for it...you will have paid MORE for it than you would have if you had bought it with cash.

The simple fact is if you want something...save your money. You all know by now my wife and I just bought a new pop-up. We saved for and entire year to pay for it. It feels good to walk into a dealer, agree on a price and when he says "how many months would you like to finance that 36, 48 or 60?" and you say "no thank you, who do I make the check out to?"...I paid cash and the pop up is mine.

If you can't pay cash for it don't buy it. NEVER, NEVER, NEVER, if you can, pay for groceries on your credit card unless you pay the balance off every month. Now if it comes down to your children starving...then do what you must. Me personally I would work at McDonald's 1st shift and Burger King 2nd shift if I had to provide for my family before it came to doing that. It just doesn't make financial sense...

Some people don't like being told these things but rest assured this is one of those cases where you will thank me later. If you already have credit card debt do you best to pay it off as quickly as you can and STOP using them.

The ONLY thing I use my plastic for it to buy stuff on the Internet...use credit not debit as most banks provide better consumer protections to you using credit cards. Always pay the full amount of the statement when you get it...in other words maintain a $0 balance (banks hate this).

I will say it one more time to help it sink in...if you can't pay cash for it...you most likely should not be buying it.

...that is all.

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  1. Total agreement here! Stash some cash!


  2. I agree with stashing cash but remember, checks aren't cash. In times of need someone might take your $20 bill but they are unlikely to take your check for $20 if they have no idea if and when the bank will reopen. It's not overly safe having too much cash in the house but the cash is very much at the same risk as your rifle, your TV set or your wifes' jewelry. Cash is kind.

  3. In reality you do not lose %20 value when you drive off the car lot. That is the excuse given but the fact is that is how much it is over priced. The people are so stupid that they actually pay 25/30 thousand for something that is worth more like 5 or 10 grand.

    But don't tell the people that... We can't let them know how badly they are being screwed in every possible direction.