Why You Need to Stop Borrowing Money and Start Using Cash

Recently I was talking with someone about buying a car. First, you have to know that I hate cars. I think they’re a waste of money and nothing more than a means to get from point A to point B.

When I bought my car last year I found the absolute cheapest one I could find. I did buy new, but for my situation it made sense. My wife and I both will drive cars into the ground.

My previous two cars were a 2000 Saturn LS and a 1999 Jeep Cherokee with 203,000 miles on it. That should give you an idea of how long we keep cars!

In any regard, this person had just “spent” a considerable amount of money on a brand new car. The amount of money we discussed almost made me scream.

I kept thinking to myself “nobody should ever spend that much money on a car”. Then I remembered something. We’re a rental society. We lease. We don’t buy.

Most people buy a new car, make the payment for a few years, then trade it in for something newer. Otherwise they lease.

We’ve somehow become a society obsessed with renting everything. So I started thinking more about it and came up with another thought.

It seems as if loans and monthly payments are giving us a false sense of wealth. If I can afford a $500 car payment, I must be doing fine.

How can this be true? A $500 car payment means that the cost of the car has to be around $30,000, give or take.

I began thinking about what our world would be like without loans. A world where everyone just had to pay cash for everything.

If you didn’t have the money to pay for something today, you couldn’t buy it today. Here are a few things I think could happen if the world became cash-only:


A cash-only society

More people would live below their means

People would soon realize if they can’t afford something, they can’t have it. This would force people to save their money and only buy things they can afford. In turn I think this would cause us to live below our means.

More frugality may impact jobs

If people are buying less, demand for goods and services would decrease. This would mean that many places would either go out of business or have to cut their workforce. This may further increase the amount of online businesses.

We’d be renting or living in smaller homes

Unless we saved a significant amount of money, we’d be living in smaller homes or renting. This isn’t a bad thing.

I imagine those who saved a lot of money and wanted to live below their means would still choose a smaller home. But with a cash-only society, it’d be difficult for people to live beyond their means.

More economical cars

We’d be buying used, smaller, and more economical cars. Also, I imagine that we wouldn’t even make as many big, expensive cars. At least not at the same level.

If everyone had to pay cash, car manufacturers would have to produce something that everyone could afford. Or better yet, maybe we’d all be driving hybrids!

A healthier society

In a cash-only society, I would hope that some of us would abandon cars all together and just ride bikes. This would keep us in great shape and be better for the environment, which leads to my next point.

Environmental impacts

With less access to money, businesses will have to change some of their strategies. This could reduce pollution, gas emissions, and wood-clearing to build McMansions for Wantlings.

Things may become more affordable

We pay for things like data on our smartphones, cable TV (some of us), and other forms of entertainment. The profit margins on these types of services are insane. If we only had a limited amount of money to spend, prices would drop on things like tickets to sporting events.

No debt

This one is pretty obvious, but with a cash-only society, there’d be no debt. At least no formal debt. I can imagine there being a black market for cash loans. Ahh… humanity never ceases to amaze me.

Higher savings rates

As this shift in our culture is taking place and people are becoming more frugal, we would begin to save more money. Since there are no loans, it’s safe to say there is no interest. But that doesn’t mean the value of the dollar wouldn’t increase.

As people are hoarding their money, demand is going to drop for goods and services. This means a possible reduction in prices, which means our dollar will go further. Win-win.

Weddings would become more realistic

My wife and I got married in St. Lucia – just the two of us. Then we had a family reception when we came home. It cost about a third the cost of a traditional wedding in the United States.

This is getting out of control. It’s one day, people… quit spending upwards of $30,000 to get married! And we can’t forget the costs of the ensuing divorce…

What you can do

Changing to an all-cash society will never happen. But that doesn’t mean we can’t take some steps to improve our society’s money problems. Here are a few steps you can take now to make an impact:

Pay off your debt

The more debt that’s out there, the bigger these credit card companies will get. This means more offers in the mail, easier access to credit, and compounding debt for us.

Live below your means

You don’t need a cash-only society to live below your means. At its most basic level, start to spend much less than you earn. Use tools like Mint to track your spending and see where you can cut back.

Get rid of things you don’t need

That’s right – declutter your home. Get rid of crap you don’t need. The more things we have, the more stress we have. And the more stress we have, the more likely we are to get sucked into DIIP.

Get help

You might be reading this thinking “well yeah that’d be great if I could just pay off my debt and live below my means, but I don’t make enough money.”

Stop it. Yes you do.

You just have to want to change. I believe that we all have the ability to live below our means and become rich.

It’s just a matter of priorities and sacrifices. What are you willing to give up to create a better situation for you and your family long-term?

This might mean not spending $40,000 on a new car. It might mean not having the latest iPhone with loads of data. It might mean not buying a home that is bigger than you need.

There are also services out there to help you. Credit counseling is an excellent way to help you pay off your debt.

But you have to be willing to stop using your credit cards. Again, this is a sacrifice to some. There are ways to make it work, and the sooner you do, the better off you’ll be in the long-haul.


There would definitely be pros and cons to an all-cash society, but I would love to see what it would be like. In the meantime, let’s all commit to making one simple change to get us there sooner.

What one thing are you willing to do to push us toward a cash-only society?


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Chris Muller

Chris is the founder of Money Mozart, a blog about personal finance. He discusses frugality, minimalism, and achieving financial independence by living well below your means. He's also an avid craft beer lover and an aspiring minimalist.

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