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Cash is King – Can You Live Plastic Free?
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While a high credit score does much more than just give you access to credit, some people choose, instead, to eschew credit altogether. Some have been burned by consumer debt in the past. Others have ethical or moral objections to consumer culture or to lending institutions. Do you think you’d be able to pull off a no-credit lifestyle? You’d have to have the following in place:
A Plan for Every Purchase
If you don’t have the cushion of credit, every purchase would have to be saved and planned for in advance. This would go from building a budget that includes everything from the power bill to your weekly latte on up to more substantial purchases like cars or houses.
While this precision takes more effort, there are some substantial upsides. With cash, you will have a better idea where all of your money is going. The need to save before you buy cuts down on impulse purchases. And, in the case of something like a car, once it’s paid for, it’s paid for. Not having the burden of a monthly car payment frees up a portion of your budget; plus, you can carry a smaller amount of insurance than you’d be required to have if you owed money on your car, which also saves you cash.
To make a large purchase like a house in cash would require having a six-figure bank balance. But, there are some great benefits to going this direction. Cash in hand gives you bargaining power in areas like the price, closing costs and the timetable of your purchase. On the other hand, buying with a mortgage means that your cash is still free to invest, which could have a larger pay off in the long run.
Traveling would also take more finagling than it does with credit cards. With no credit cards, you will probably have to make cash deposits for everything from rental cars to hotels to cruise ship accounts. Usually, each of those vendors would just put a hold on your credit which is lifted after your trip is over. If you choose cash deposits instead, you’ll need to save up for those in addition to any costs of your trip.
Eagle-eyed Attention on Your Cash
If someone steals your credit cards and goes on a shopping spree, you can contact your bank’s fraud division and get the charges removed. But, if someone steals paper money, you have little recourse. If you use debit over credit, you will also need to watch finances closely. If you report unusual activity within two business days, you are just out $50; but, wait longer, and you could be on the hook for up to $500.
While some people choose to go 100% cash-only, everyone has the option to do it some of the time to get the best benefits of this lifestyle choice. Consider, for instance, building cash in a savings account for your next electronics purchase. By picking and choosing when to go plastic and when to go cash, you can get the best benefits of both lifestyles.