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Live only in cash: is it worth it?

The internet is full of TikTok stars and financial gurus (like Dave Ramsey) who swear to live on cash only. They advertise it as the best way to save for the future and live debt-free.

All their conversations can make you think: is it possible to live only on money? And is paying cash only a good idea? Let’s discuss the pros and cons so you can decide for yourself.

But first… what does it mean to live on cash only?

What is a cash-only lifestyle?

The cash-only lifestyle means you only use cash for all your purchases. This means no credit cards. No loans. Nothing like “debt”.

The cash-only community is divided over whether debit cards are allowed. Some say it’s okay because the debit card is tied to the money in your bank account.

Others argue that you should also ditch debit cards and only use fiat money. Their reasoning is that debit cards are still a form of plastic and can trick you into spending more than you should.

The pros and cons of a cash-only lifestyle

A cash-only lifestyle promises freedom and peace of mind. But there are both pros and cons to be aware of.

Pro: makes you live within your means

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Many people switch to a cash-only lifestyle because they are tired:

  • Tired of reckless spending.
  • Tired of mountains of debt.
  • Tired of feeling like they don’t have money.

They see a money-only lifestyle as a way to stop the bleeding—to force themselves to live within their means so they have no choice but to push for more.

And if you’re the type of person who needs extreme barriers to get their finances in order, a cash-only lifestyle might work.

Read more: Why you live beyond your means – and you don’t even know it!

Pro: Helps you save money and stay out of debt

Another benefit of a cash-only lifestyle is that it can help you save money and stay out of debt.

When you use cash, you are far less likely to make an impulse purchase or overspend. This is because you can physically see how much money you have and when it’s gone, it’s gone. With credit cards, it’s easy to lose track of your spending and accumulate a lot of debt.

A cash-only lifestyle can also help you avoid interest payments and other fees associated with credit cards. When you use cash, you never have to worry about paying interest on your purchases.

Read more: How to pay off credit card debt quickly – the smart way

Pros: keeps you informed about your expenses

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Many people like the cash-only lifestyle because it sheds light on what they spend their money on. It also forces them to think ahead of every decision they make.

If they add this pack of cookies to the grocery cart, will they have enough money to cover it when they get to the checkout? If they spend some of their savings on a vacation, can they afford a new car?

Life is full of compromises. But it can be difficult to understand how many compromises there are when credit is always available. But with a cash lifestyle, you are forced to slow down, think, and be more mindful of your spending.

Read more: How Mindfulness Can Help You Save Money

Con: You don’t have a credit score

It may come as a surprise, but you need a credit score for just about everything:

  • To get a loan.
  • To buy a car.
  • To rent an apartment.
  • To get a credit card.
  • For utility deposits.
  • For mobile phone plan.
  • Auto insurance rates.
  • For employment.

While it is technically impossible to live without a credit score, it can make life incredibly difficult. So this is something to keep in mind if you plan to live a cash-only lifestyle in the long run.

Read more: It is possible to live without a credit score, but is it reasonable?

Cons: You can lose your money

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While credit cards and checks can be replaced if lost or stolen, cash doesn’t work that way. If you lose it, it will be impossible to return it.

This can be a serious disadvantage of a cash-only lifestyle, especially if it requires you to carry a large amount of cash around with you. Also, it can make you a target for thieves.

Cons: Not everywhere accepts cash.

Not all businesses accept cash, which can be frustrating if you’re trying to live a cash-only lifestyle.

Some businesses, such as car rental companies and hotels, may require a credit card to hold a booking. In addition, online stores and many self-service kiosks do not accept cash.

Read more: Which countries are switching to cashless payments? And why should you too

Cons: You will still have financial stress

While a cash-only lifestyle can help you save money, it won’t relieve you of financial stress. If anything, it can lead to different types of financial stress.

For example, in addition to having to make difficult decisions about where to spend your money, you must:

  • Visit the bank every time you get paid.
  • Stay within the ATM withdrawal limit.
  • Create your system of money envelopes.
  • Keep track of all the shops you can’t go to.

Also, you may be worried about what you will do if an emergency happens and you don’t have enough cash to cover it.

For some people, a cash-only lifestyle can be too restrictive and cause more financial stress than relief. In this case, it is better to find another way to manage your money.

Alternatives to a Life Based on Cash Only

Living on cash isn’t the only way to get your finances in order. Here are two other approaches you could try:

Try a zero-based budget

A zero-base budget is a system in which your income minus your expenses is zero.

The advantage of this method is that you have to account for every dollar you earn. You can’t just let money “disappear” into thin air.

This is a great alternative to a cash-only life because you need to plan ahead. This makes it really difficult to take on more debt.

But unlike cash, it provides more flexibility because you can use any payment methods you like — cash, debit cards, credit cards, financing, whatever.

Read more: Which budget system is best for you?

Use a hybrid approach

With a hybrid approach, you can use cash for some expenses and plastic for others.

For example, you can use cash for everyday expenses such as groceries and gas. But you can pay for larger purchases with a credit card to earn reward points.

Or maybe you use cash for discretionary expenses like eating out and entertainment. But you use direct deposit for rent and bills.

The main thing is to find what works best for you and your budget.

Read more: How to use a credit card responsibly

Final verdict

A cash-only lifestyle can be a great way to avoid debt and get your finances in order in the short term. But this may not be a good long-term approach.

If you’re considering a cash-only lifestyle, weigh the pros and cons to see if it’s right for you.

Featured Image: Dmitry Lobanov/Shutterstock.com

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