Dave Ramsey is Right!

 Same as Cash is NOT the Same as Using Cash!

Okay, can I be honest with you? Prior to reading Dave Ramsey's The Total Money Makeover, I thought that same-as-cash deals were a wonderful idea. Six months after my husband and I were married, and six months of sleeping on an air mattress motivated us to purchase our first set of Serta Perfect Sleeper queen size mattresses by taking advantage of a same-as-cash deal. The mattresses cost us a total of $741.00 and we were determined to pay off the debt within 6 months in order to avoid paying any interest on the purchase. We paid a $141.00 deposit for the mattresses, took them home, and then paid $100.00 for six months and accomplished our goal. The mattresses were paid in full and we didn't have to invest a dime in interest payments! 

Fast forward a few years...I'm introduced to Dave Ramsey's book and learn that same-as-cash really isn't the same as using cash. Maybe you're like me...maybe you're going, "Huh? Why not?" Well, Dave Ramsey makes a solid argument to get his readers to understand the difference between using cash to make purchases and accepting same-as-cash deals. He explains that while using a same-as-cash deal and paying it in full before the deal expires and accrues interest might allow you to pay the store price for an item, walking into a store with cash in hand gives you the power to make your own deal...a better deal with the sales representatives and managers than that which a same-as-cash deal can provide. 

It's works like this. Imagine that you're trying to sale your old, used car for $1,000 and my girls Morgan and Michelle are interested in purchasing it. Morgan is willing to make monthly payments in the amount of $166.67 for six months in order to purchase the vehicle, whereas Michelle has cash in her hands and is willing to pay you $900.00 for it right now. Which deal would you accept? I'm guessing you'd rather receive $900.00 from a stranger who is presently able to buy the car and help you to accomplish your goal of earning cash and getting rid of it, than to venture into a short-term loan agreement with an absolute stranger...a person you're not even sure you can trust to make her payments and fulfill the responsibilities of a loan.

The same is true in business. You want to buy new furniture for your livingroom? I guarantee you that you'll do better by planning, saving, and taking cash to the showroom floor than by banking on a same-as-cash deal to furnish your room. Even if you only save $100.00 on the deal, it's $100.00 more than what you'll save by purchasing furniture using same-as-cash. Besides, promising a company you'll pay a loan in six months doesn't allow room for the unexpected.

What do I mean by that? Almost six months after my husband and I successfully paid for our mattresses by using same-as-cash, we embarked on a similar deal to purchase a sofa and a loveseat for our bare livingroom. You'll never guess what happened. Yes, you will. The unexpected happened. Guess what the unexpected cost us? Instead of paying the $2,000.00 the furniture originally cost, we ended up paying more than $4,000.00 for it! We paid for the furniture twice, and needless to say, that was our last same-as-cash purchase.

So, Dave Ramsey is right! Same-as-cash is not the same as using cash!

* If you've never read The Total Money Makeover, I highly recommend it. It is a great resource that will help you to shift gears and approach your finances in a new way and will challenge you to aggressively apply principles and concepts that will drastically improve your current financial reality.