I guess this has always been an obvious step for me. Not to say that we have never financed anything, but we never finance anything that has interest attached. For example, several years ago we bought furniture. We did have the money in cash, but at the time interest rates in our savings account were fairly favorable. So we opted to finance the furniture for 12 months at 0% and pay make self-imposed payments every month, assuring that it would be paid off before the time was up. We did something similar when buying supplies for a home remodeling project. This is not something I recommend for everyone. It worked for us because we didn’t want to tie up such a large portion of our savings when it could be earning interest. Now currently, there is no real benefit to opting for 0% financing instead of paying cash because interest rates are so low. Unless the purchase is unusually large, I’m not going to miss the 1.5% I’m earning on my money in the mean time.
This gets dangerous if you finance more than you actually have in cash. If you were to suddenly lose your income, you would be sorry you now have to make those payments from your almost nonexistent monthly cash flow instead of dipping into your savings account.
But as Trent pointed out, whenever possible, paying cash saves you so much money in the long run vs. paying interest.
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