Why Pay Cash?

The American society does not promote paying cash. That explains why many people lease cars, electronics, and just about anything. That also explains why so many people are debt-ridden.

I remember when I first came to the United States some two decades ago, I was told not to pay cash for any purchase, or else I would never be able to establish my personal credit rating. This is the characteristic of the American culture: promoting buying on credit and debt.

If you buy into this absurd notion that paying cash is bad, you are in fact buying into a lifetime of debt. Of course, this is your choice: after all, this is a free country.

Just remember this: “The borrower is slave to the lender.” Proverbs 22: 7.

For one reason, if you do not have the cash to buy something, maybe you shouldn’t buy it in the first place. Do not lead a lifestyle of debt by anticipating what you will get. Instead of delayed gratification, it becomes anticipatory buying. The only legitimate reason for carrying a credit card is that you don’t want to carry too much cash with you. Or maybe another reason is that you may want to manage your finance by using different credit cards for different expenses. However, if for any reason, you carry a balance on your credit cards, you maybe heading towards a lifestyle of debt, which is easy to get into but difficult to get out of.

Why pay cash?

If you do not have the cash right now, you may make an extra effort to save towards getting what you want to purchase.

Delayed gratification often gives you more time for second thoughts – you may decide against the purchase. That may save you a lot of money!

Delayed gratification may also give you more opportunity to get what you want at a much better price, or more ammunition to negotiate with the vendor. If you pay cash, the vendor may not push the sale so much, knowing that without an easy financing, there will be less profit from your purchase. Remember, the vendor has much to benefit from easy financing as opposed to paying cash: the vendor benefits at your expense.

Paying cash is good because it saves you from debt. If paying cash is debt free, then why do we have corporate debt? Well, corporate debt may not be such a good idea after all because it encourages buying when no cash is available, and any economic downturn may jeopardize the corporate investment. If corporate debt is good, why is Microsoft debt free?

The bottom line is: no cash, no purchase; no cash, no investment. Don’t buy into the notion that the investment is an opportunity of a lifetime, or that some debt is good. All debt is bad. Even a 3-year mortgage may be bad for you. For example, if you have problems making your monthly payments, most probably you have taken up a mortgage larger than you can afford, and that may become a bad debt, leading to foreclosure.

Stephen Lau

http://www.smartcreditsmartmoney.com

http://www.abundantwebcash.com