Why Cash Only?

One of the credos I have been living by this year is to live a cash-only life.  It’s a few of the non-breakable rules I’ve given myself to take control of my finances and attempt to dig myself out of debt, and live a life of prosperity.  I have to give credit where credit is due.  A lot of these ideas that I’ll be writing about, while a part of my daily life, come from Dave Ramsey’s Financial Peace University.  I’m a big fan of Dave, and his podcast has changed the way I think about money.  It has also changed the way I think about life, family, and what’s important.  No, I haven’t taken Financial Peace university (yet – my DVD’s are somewhere on a USPS truck between Nashville and New York), so this blog will be a mixture of my ideas, Dave’s ideas, and tips and tricks.

What is cash-only living?  All you need to do to live on cash is:

Cut up your credit cards.

You heard me correctly.  Now, I don’t recommend this for everyone, although if people who are financially sound want to give this whole thing a try they are guaranteed to find thousands of dollars they didn’t even know they had.  These are the dollars spent eating out, paying ATM fees, dollars lost because a similar product was on sale the next aisle over, etc.  But you also rid yourself of your emotional attachment to money and swiping your credit card.  It gives you peace of mind to swipe for whatever you need in the moment, but it builds discipline to pay cash for only what you need, and to discover what you need you must plan ahead.  A budget, money conferences with your family, roommate, or spouse, etc.  Not only does this strengthen the bond between you, but it will put you both in control of your futures, erasing the chance that you will fight over money.

So, why cash only?  When I talk about not having credit cards I get a mixture of people who feel bad for me that I don’t “understand” the importance of developing a high credit score, and people who think I’m plain dumb.  They look at me and raise their eyebrow like I’m some religious zealot.  Like I would jump off a bridge if Dave Ramsey told me to.  The truth is, Dave Ramsey’s program is helping to get my life back on track, so if he told me it would help my situation, I would probably take the leap.  It’s not some fad financial diet or get-rich-quick scheme.  He’s venerated by millions as the smartest man in the United States in the field of personal finance and investing.  Heck, he made millions and lost them TWICE because he was still stupid after the first time.  Talk about a stupid tax!

The guy has been in the trenches.  I’d rather take my advice from him on what not to do then listen to my peers – some of them 30-something year old smart asses who rattle on about how they’re going to make money on their single-stock portfolios.  Chances are, they’ve never known what it’s like to search the floor of your 1985 Buick for quarters to pay for groceries.  They haven’t felt the hunger.

I’ve paid enough stupid tax.  Now I’ve got to slowly piece together my financial life and repair the destruction caused by my terrible choices.

You go cash only to teach yourself discipline, and to prevent debt from ever dragging you down again.  You go cash only to be purposeful with your money, and to have control.  It’s an exercise.  Being debt-free and in the green is 20% know-how and 80% behavior.  This stuff isn’t rocket science.  It’s just a hard practice.  Kind of like playing the piano.  You think it’s great, you like the sound, and you could understand it fairly easily if you were only willing to put the time and effort in to see results.

I’ll admit that I listened to some close family members and opened a credit card for small purchases when I was 19.  They thought they were doing the right thing and teaching me about credit, which is a subject they were experts on.  One of them had multiple credit cards at the time.  Years later I would discover that not only did they have multiple credit cards, but they were an expert in store credit cards – Macy’s, JCPenny’s, Target, Bed Bath & Beyond, and many more.  One day I was snooping in their purse for a few dollars to tip the delivery guy (a crime I am willing to admit to), and my hand brushed up against the inner zipper pocket of the purse.  It contained at least 20 cards, all from local department and retail stores.  An expert in credit, indeed.  The rest of my family had no idea.

Take a scissor to your credit cards!

And so, I was raised around the idea that I should spend, spend, spend.  If I was bored on the weekends?  Go to the mall and spend some money on clothes.  If I was out in town somewhere and got hungry?  Stop at the diner and drop twenty.  My parents and my friends’ parents were in on this lesson on how to handle money.  They encouraged us to hang out together, sticking wads of money in our wallets and coat pockets.  We went to the mall to buy books and music (thankfully we were nerd children), then to the movies, then to the diner before we said goodnight.  Our parents would fill up the car’s empty gas tank in the morning without saying anything.

The word budget never entered our vocabulary.  It was a good life.  Very cushy without a financial care in the world – all other issues aside.  I’m grateful for this and the freedom and happiness it afforded me.  My parents tried to give me everything.  I was their first child.  But the fairy tale soon came to an end when I hit the real world and immediately face-planted.  Parents.. if you teach your kids only one thing, teach them about money.

faceplant
Real-world faceplant!

One tragedy was that I never saw my parents sit down and talk about money.  It was usually the opposite – arguments in the kitchen over what women buy at the store, and the counter argument that men didn’t know what kind of money it took to raise 4 kids and a dog.  At the time we lived in the second most expensive county in New York (13th in America).  My parents put my childhood home up for sale last week.  A good decision, financially, but a heart wrenching one for me and my siblings to stomach.

My answer to the question “why cash only?” is a complicated one that has taken a lifetime to realize.  Sure, it’s harder to spend cash.  If you only take the cash you need to pay for something you’ve pre-determined in your budget, it’s hard to spend impulsively.  There are practical reasons for living this way.  But seeing my parents sell our house, dip into their retirement, and struggle finding new jobs after years of security was scary.  I don’t want my story to end this way.

The question I hear most is “Why is debt bad if you pay it back in full, on time?” These are the credit card people.  And if they are cool with paying it back right away, great.  But if you have the money to pay it back right away… why don’t you just buy it?

Why do you have to show you are responsible by taking out debt?  That is the opposite of responsible.  That is the definition of irresponsibility.

The only reason landlords and mortgage companies look for good credit scores is because credit card companies have branded debt into our lives so completely.  They have dictated our financial freedom, and the message is: to be normal you cannot be free.

Everyone who thinks debt is normal is in it.

I’m happy being the weird one if it means I control my own finances.  I hope that in the future I’ll make decisions based on what makes me happy as opposed to what my creditors “allow” me to decide.

Stick around for my next few blogs which will show you how I do my budget, and show you the “envelope system” which helps me keep track of my cash.  Until then!

29 and Broke

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