Difference between debt and cash

[corn18]

Something I have noticed since I paid off all my debt: it's a lot easier to spend money you don't have than money you do have. Example: I want a new chain saw. Before I would just charge it and add that to the already ludicrous debt. Now, the 10 year old one is still working and a new chain will do just fine. My truck is going on 8 years old. Before, I would just trade it in and keep the car payment going (yup, I would still be paying on it after 8 years). Now I have no interest in a loan and prying the car fund out of the bank is not very appealing to me.

In other news, the retirement calculator is now predicting a 95% chance that I will have enough money to retire by 60.

Wonder if those two things are related?

Tom

[MonkeyMama]

That's Great!

There's so much more to it psychologically than just the math.

[disneysteve]

There's so much more to it psychologically than just the math.

Very true, which is why Dave Ramsey's system is so successful. It isn't based on math. It's based on changing behavior.

Tom, it's been so great to follow your progression. You've really provided a fantastic example of how the things we all preach really do make a difference when you put them into practice.

[Singuy]

Probably has a lot to do with paying in installments(debt based) vs paying in full (cash based).

It takes a lot of hard work to save up 20k for a new car so when you have saved it up, you are more reluctant to spend it and start talking yourself out of it(plus you may have lost interest due to the long amount of time it took for you to do the saving vs impulse wants).

You may have not changed the behavior of wanting things, but cash based payments definitely get you to see the gravitas of the true cost of the item (in hours worked) vs a smaller monthly payment.

[snafu]

Do you believe the research that says people often buy more or upgrade the planned purchase when using CC rather than cash. Somehow there is a disconnect between using real dollars and a plastic card.

I often hear folk discuss impulse purchases they really didn't want in order to chase CC points or cash back. Makes no sense when they pay so much in interest.

[corn18]

Probably has a lot to do with paying in installments(debt based) vs paying in full (cash based).

It takes a lot of hard work to save up 20k for a new car so when you have saved it up, you are more reluctant to spend it and start talking yourself out of it(plus you may have lost interest due to the long amount of time it took for you to do the saving vs impulse wants).

You may have no changed the behavior of wanting things, but cash based payments definitely get you to see the gravitas of the true cost of the item (in hours worked) vs a smaller monthly payment.

I think this is spot on.

Do you believe the research that says people often buy more or upgrade the planned purchase when using CC rather than cash. Somehow there is a disconnect between using real dollars and a plastic card.

I often hear folk discuss impulse purchases they really didn't want in order to chase CC points or cash back. Makes no sense when they pay so much in interest.

No clue. For myself, I would imagine paying cash would reduce my spending. But the argument is lost on me as I would never carry enough cash to cover my monthly spending. A normal trip to go grocery shopping, get gas, pick up dry cleaning, get a haircut, get some pet supplies, etc... would top $400. I keep the same $60 in my wallet for weeks or months. So I trade the risk of overspend for the convenience and safety of a credit card.

Tom

[rennigade]

If you're planning on buying a husqvarna or stihl you may need a part time job to cover it. Those bad boys are expensive.

[corn18]

If you're planning on buying a husqvarna or stihl you may need a part time job to cover it. Those bad boys are expensive.

They are quite pricey. But so, so shiney! And my neighbor has one. I feel inadequate when I pull out my beat up, old, cheapo Poulan that I bought 10 years ago for $89. For $240, I could keep up with Mr. Jones. For $485, I could kick his butt with the pro model. Doesn't matter that I don't have any tress in my yard.

[FLA]

In other news, the retirement calculator is now predicting a 95% chance that I will have enough money to retire by 60.

Wonder if those two things are related?

Tom

yay and I would think probably

[tripods68]

Congratulation Tom for your financial peace!

We are also debt free, and look at things a lot clearer and behavior have changed. It is a lot harder to spend your own CASH. You're more reluctant to let those cash go on things that are really not that important. Want vs. Need. Do I need to repair it or want to buy a new car. We suffer the compulsive behavior of "just charge it" before we made our complete FPU transformation this year. Now that we are debt free, we own a beater, and only purchase things based on need not want.

[LivingAlmostLarge]

It probably has to do with being aware more than cash versus credit. People who use credit and are aware of every penny being spent won't overspend any more than someone using cash.

[Fishindude77]

Good job tomhole!

We've been free and clear for a while now and feel very similarly.
I've been driving the same pickup for 5 years or so now and drool a little when I see the nice new ones, until I look at the price tag.

I could buy one, but I'm not going to. Think I'll just get mine detailed, keep the maintenance up and drive it a couple more years.