When it comes to ditching debt, cash is king.
But is it really practical? Can you give up plastic without feeling like a 19th century holdout in a 21st century world?
The answer for many who've tried it is a resounding "yes."
Financial guru Dave Ramsey gave up credit cards more than 20 years ago. "It simplifies your life," says Ramsey, author of "The Total Money Makeover: A Proven Plan for Financial Fitness," and host of "The Dave Ramsey Show."
The other plus: "No gotcha fees," Ramsey says.
Even so, using cash only may not be for everyone. It requires writing a spending plan, staying on top of your account balances, monitoring your credit score, submitting to only minimal and calculated credit card spending, and most importantly, being disciplined. If you think you may be up to it, read on.
4 morsels to taste-test in an all-cash diet
- Is an all-cash spending plan for you?
- Is a debit card paper or plastic?
- Is there still a need for a credit card?
- Can you protect your credit score?
Like the phrase "low carbs," "all-cash" means something different to everyone. To many, going all cash means using cash, checks or debit cards, without deferring payment to a later date. To others, it means using cash or checks only. To them, a plastic debit card feels and spends much like a credit card.
To Ramsey, cash means "that we're paying for things (now)," rather than running a tab, he says. "We write checks and use debit cards at our house."
When Dave Fernandez and his wife went all cash about eight years ago, the Arizona couple just wanted to hit the reset button on their spending habits. "I'd get a huge (credit card) bill every month, and I was always shocked at how much we spent," says Fernandez.
So they used a mostly cash system for the next few years and right away, they noticed a difference. "We spent $1,500 to $2,000 a month less when we started using cash," says Fernandez, a Certified Financial Planner and founder of Wealth Engineering LLC in Scottsdale, Ariz. Having to part with real money, he says, "just makes you think twice about it."
Greater saving after switching to cash is typical, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. On average, she finds people save as much as 20 percent when they spend cash instead of plastic.