Benefits and Considerations of Cash Purchases

Cash payments empower individuals to avoid debt, ensuring financial freedom and stability for future purchases.

### The Benefits and Considerations of Making Large Purchases with Cash
* 💸  Paying cash for large purchases eliminates liability and allows you to **move on from the purchase without ongoing financial obligations**.
* 💰  Cash is purely liquid and provides natural guardrails to prevent overspending, promoting **sound financial behaviors**.
* 🎯  Using cash requires exercising **deferred gratification**, saving up for a purchase instead of **instant gratification**.
* 🤔  Before using cash, consider if it will require **reducing retirement savings** and if the purchase is a **realistic goal or a distraction**.
* 🏦  Determine if the purchase is a **lifestyle choice** or an **investment in the future**, assessing its impact on **long-term financial goals**.
* 📊  Use tools like the "**wealth multiplier resource**" to understand the **long-term impact** of diverting cash from savings and investments.
* 💼  Avoid draining emergency reserves when paying cash for large purchases, as cash is crucial for **financial security and wealth-building**.
* 🛑 " You actually get into your emergency reserves, and remember the whole purpose cash is so important to your wealth-building journey. It doesn't just get one, it gets two steps in financial order of operations with both **steps one and steps four** because it's trying to help you **protect yourself from making those desperate decisions** that put you in a ditch before your financial journey even gets to get a start on this.

[Music] Let's start with the very first one. I think this may be our favorite, if you don't try to have favorites, but this might be our favorite when it comes to making our large purchase. If you can, if you have the ability, we think that probably the best way to pay for large items is just using cash, saving up for it, and paying cash in full. Yeah, this section is sponsored by Captain Obvious because I'm sure a lot of people are saying, Of course, if we can pay cash for it, we would pay cash. But I think a lot of people are going to quickly realize that there's more. But I do think it's important to, let's do the low-lying fruit, is because a lot of times people will say, Hey, I'll just finance this or do so. I think it's smart that we're starting off and we're saying, Hey, what are the benefits of paying with cash and how can we avoid some of the traps that a lot of Americans fall into? Yeah, the first benefit is when you pay with cash.

there is no liability. You're not beholden to someone else that if you miss a payment or you get into hard times, they can come take that thing away from you. You're paying for an experience that happened in the past for many years in the future. There's no liability with it, so it allows you to buy something or experience something and then move on from that purchase. That's a big benefit of using cash. The other thing that, um, I think when it comes to you're figuring this out because you've experienced this too, Bo, is that big expenses or big purchases like a home, buying a house. M, if you waited until you could afford it with cash, I mean, the market would run from you. I mean, we went through this post-inflationary period. People were saving, being diligent. So, do we get the question all the time is, Well, if I can't pay cash or, you know, or I need to save up for the cash, when do I know it's okay to maybe lower my retirement savings or how do those type

of things we want to help you navigate this so you know how debt works, but you also know when you might have to take a moment in time to even lower your retirement savings. I love it. And so, not only do you have those benefits, but also when you have cash, it's purely liquid. It's also a thing that when you use cash, there are some natural guard rails in place that you cannot overspend. If you save for cash, you have your pocket, your bucket of money right there. A lot of times with other types of debt instruments, you start thinking about it like monopoly money, and you recognize that the cost of your project or the cost of your whatever it is gets higher and higher and higher. And the other thing that we love about cash payments is it allows you to exercise that deferred gratification muscle. It allows you to say, Okay, I want this thing, I want this experience, I am going to save for it, I'm not going to have it today or tomorrow or next month or in the next six months.

but I'm going to put in the time to save up the cash to be able to eventually have that thing that's a wonderful tool for you to have inside of your financial tool belt to create that habit of making really sound financial behaviors. But now people want us to get to how do you know cuz you're putting a lot in there but people still want to know you're asking a lot with a little because a lot of our listeners in our audience is they're in the messy middle. They're short on time, they're short on money, they got kids, they got relationships, they got work responsibilities. How do you get it all in there because sometimes you're just not going to have enough cash. So how do we do this? Yeah, that's exactly right. Sometimes you have to make the decision, okay, do I reduce my retirement savings? Do I back down what I'm saving for the future to do something for today? And I think the first question you have to answer is what are your goals? Like when you think about going to buy this

thing is this thing a realistic goal that you have that needs to come to fruition today, or is it a distraction? Is it something that's pulling you off track? And if you're willing to do that thing today, do you recognize the cost that you're going to bear for not having something in the future? Yeah, and also look, we're not misers, we're Financial mutants. So I do want you to make sure that I want you to live a disciplined life, but I do want you to make sure you're taking time to build memories. You're doing, you know, every decade should have great memories, so make sure you are bedazzling your basic life. I don't want you to live that Miser life, but that definitely needs to go into the consideration. And then if you are thinking about decreasing your retirement savings, you need to ask yourself, Okay, is this thing I'm doing right now, is this a lifestyle purchase? Is this something that's just going to increase lifestyle, and it's going to be a short little win, or is this going to

be an investment in the future, and investment doesn't always mean like rate of return going to return money. There are times when you might say, Hey, my family needs this thing right now, and while it's not going to have a dollar return, it's going to make the quality of our life better for years to come. That would be an investment in the future more so than an experience today, and you want to measure, Okay, is the thing that I'm doing, is it worth me sacrificing future retirement savings to do that? And giving you perspective, if you are going to trim down your savings and investment rate, you got to quickly make an assessment and do the homework and knowing, Are you ahead of the curve? Are you behind the curve? Or are you right where you need to be? I think a lot of people just default to the easy answer is, I'll just trim back on saving and investing because I need it this moment in time. I need this. Don't do that. Don't fall into that trap. I want you to actually do the homework.

there's a reason we created the tool of know your number, so you can actually figure out and answer that question without a financial adviser. Am I ahead of the curve, behind the curve, or right where I'm supposed to be? Don't skip those steps, okay? So, what should you consider before using cash? The very first thing is if doing so is going to require you to back down your retirement savings. There will be a cost, and here's something I think you should do, and it's going to insert an appropriate amount of fear. I want you to go to moneyguy.com and download our wealth multiplier resource. We have a tool that you can play with, and I want you to see what every dollar that you put to work for you can turn into by the time that you get to retirement. And then you need to make the assessment: is this thing that I'm doing, is this thing that I'm buying, is this experience that I'm having, is it worth me foregoing that wealth multiplier? I

Need to answer that question honestly before you make the decision to back down retirement savings. The other thing is because if we're paying cash for something, you run the risk that if you use too much of your cash, you cut to the bone. You actually get into your emergency reserves, and remember the whole purpose cash is so important to your wealth-building journey. It doesn't just get one, it gets two steps in financial order of operations with both steps one and steps four because it's trying to help you protect yourself from making those desperate decisions that put you in a ditch before your financial journey even gets to get a start on this. So make sure you're not draining your cash down to the level that you are getting desperate.

This Is the BEST Way to Pay for BIG Expenses! (Brought to You by Captain Obvious)

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The Money Guy Show

The Benefits of Paying for Large Purchases with Cash

Paying for large items with cash is recommended as it eliminates liability and the risk of missing payments.

Using cash allows for a smoother transition from the purchase, without being beholden to someone else.

The speakers acknowledge the challenge of saving for big expenses, like a home, but emphasize the importance of avoiding common financial traps.

The Importance of Cash in Financial Management

Cash is a liquid asset that helps prevent overspending and allows for deferred gratification through saving.

Using cash encourages sound financial habits and decision-making.

In challenging times, individuals may need to adjust their retirement savings to meet immediate financial goals.

Balancing Immediate Needs and Future Goals

It's important to assess whether your current goal is realistic or a distraction pulling you off track.

While living a disciplined life is essential, making memories and enjoying life should also be a priority.

When considering decreasing retirement savings, evaluate if the expense is a lifestyle purchase or an investment in your family's future quality of life.

The Importance of Knowing Your Financial Number

The "Know Your Number" tool helps individuals assess their financial status without a financial advisor.

Before using cash, it's crucial to consider the impact on retirement savings.

The Wealth Multiplier resource on moneyguy.

com can help individuals understand the long-term value of their money and make informed decisions about spending.

The Importance of Maintaining Cash Reserves

It's crucial to be honest with yourself before reducing retirement savings.

Using too much cash for expenses can deplete your emergency reserves, which are vital for your wealth-building journey.

Maintaining adequate cash reserves helps protect you from making desperate financial decisions.