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My wife and I are going on 3 years debt free except our mortgage, and I have to tell you, it's a great feeling.

I still remember sending in that last student loan payment, just having a feeling of a weight lifting off of my shoulders, and not having to worry about that obligation any longer.

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There was a new found sense of freedom we found by paying off our last debt. We would now be more free to save, invest and give!

In our 3 years of debt freedom we've started to get back to the personal finance basics, doing things like living below our means, paying ourselves first, and planning for unplanned emergencies. We've started keeping a family budget, and making sure we know where our money is going. We've made a lot of big changes!

One of the major changes that we've implemented is that we're now starting to forgo the use of credit cards and finance plans, even on the biggest of purchases. We're not longer financing our cars, or our furniture. Instead we're saving up and paying cash. If the money ain't in the bank and we can’t pay cash, we don’t buy it.

Paying Cash Can Be Done For Most Purchases

Saving cash to purchase most things isn't that hard if you plan ahead. Last year we were finding that our old 5-6 year old desktop computer that we'd been using for years was starting to get slower, and our ability to upgrade the old machine was just about maxed out. It was time for the old computer to move on, and time for us to upgrade.

In the past, as soon as we had decided to replace something, we would have gone out and purchased it on one of our credit cards, or signed up for a financing plan, so that we could get the item right away. Things are different now because we only pay cash. So instead of having instant gratification we saved up for a month or two and got together enough cash to buy a nice refurbished Dell computer. We upgraded the desktop, but kept our old monitor. No need to upgrade everything if we don't have to! In the end we researched and found the best deal, and only spent $300 or so to replace our old machine. Much less than we might have spent in the past!

Paying Cash For A Used Car

We also bought a used car about two years ago. Now you might think that paying cash for a car wouldn't be do-able, after all a new or used car costs thousands of dollars! But our last two cars have been paid for in cash. It just requires that you have some discipline. We used a plan similar to the “Drive Free Cars And Retire Rich” plan espoused by Dave Ramsey. Basically you start out by buying a relatively cheap $1500 or so car with cash. Then, over the ensuing years you drive that car and you pay yourself a car payment. When the time is right to buy a new car, you have enough cash to pay for it outright! We've done it twice now, and we're starting to search a for a mini-van or SUV since we just had our first child. We'll pay cash for this car as well!

Plan Ahead And Save For Bigger Expenses

If you want to do the same as we have and start paying cash, just start a budget, and include high ticket items (and smaller items) as a savings goal! When you plan ahead for big expenses, both emergency expenses and planned expenses like a new car, you'll be much further ahead when the time comes to pay for those expenses.

I will grant that some bigger expenses, like buying a house are much more difficult to do, and not everyone will choose to save up and pay cash for those. We didn't. But if you're really motivated, that can be done as well.

Benefits Of Paying Cash

There are tons of benefits to paying cash for the things you buy. Among them:

No need to worry about missed payments or raised rates : If you don't have any payments to make, you don't have to worry about whether or not you made a payment on time or not. You also don't have to worry about whether or not your bank will raise your rates on your credit card arbitrarily. That means less bill paying stress at the end of the month!

: If you don't have any payments to make, you don't have to worry about whether or not you made a payment on time or not. You also don't have to worry about whether or not your bank will raise your rates on your credit card arbitrarily. That means less bill paying stress at the end of the month! You can build wealth faster with no debt: When you have debt, it's much harder to save and build wealth. Shun debt and you'll be better off!

When you have debt, it's much harder to save and build wealth. Shun debt and you'll be better off! Paying cash means you spend less: Studies have shown that people who spend cash just end up spending less money. Using plastic means you'll spend 12-18% more according to a Dunn and Bradstreet study. It hurts more to pay with cash that you have now, than it does to pay slowly over time with money you hope to have in the future.

Studies have shown that people who spend cash just end up spending less money. Using plastic means you'll spend 12-18% more according to a Dunn and Bradstreet study. It hurts more to pay with cash that you have now, than it does to pay slowly over time with money you hope to have in the future. You can get a cash discount : Some retailers will give you a discount if you pay cash. The reason? You're saving them the interchange and processing fees charged to them when you use a credit card. Don't forget to ask if there is a cash only discount!

: Some retailers will give you a discount if you pay cash. The reason? You're saving them the interchange and processing fees charged to them when you use a credit card. Don't forget to ask if there is a cash only discount! Having less debt means less risk in a down economy: When you have less debt you don't have as much risk when it comes to a job loss or other unplanned negative event. When you have no debts, you don't have payments to make at the end of the month!

For me and my family the benefits of saving up and paying cash far outweigh the negatives, and we'll continue doing it for the foreseeable future.

Have you tried paying cash for the things you want, instead of using a credit card or financing plan? Did you end up spending less, and did you feel more free by paying cash? Tell us your thoughts in the comments!



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