It was killing us, not literally, but spiritually, mentally and emotionally we were exhausted from seeing the ax looming over our heads. We realized that no one else got us into our mess but the people we saw in the mirror. Now that we weren’t going to pay with plastic, we had to pay with paper. Combined with creating (and following through with) a budget, paying cash really gave us the momentum we needed to start working our way out of the mess we were in. That is what changed: we truly started paying with only cash. Before, we played around and kept credit cards around. I cannot stress the freedom that is gained when you pay only in cash; not credit. We had to learn some difficult lessons, and I’ll admit that a lot of this is our irresponsibility and immaturity, but there’s a funny thing we’ve noticed. Our entire thought process changed when we didn’t give ourselves the option of thoughtlessly going into debt.
We recently had to get the brakes on our car fixed. I always like to try to fix it myself, but with the amount of rust in and around the drums, there’s no way I could repair it without damaging the brake line. I don’t mess around when it comes to brakes so when it was in the shop they noticed a few other things that needed taken care of. We estimated that the bill would be a certain dollar amount, but it ended up being considerably more. We had money for the repair set to the side, but it consciously set off an alarm in my mind when I heard the total. At that point, I needed to check the bank account to make sure there was enough available to cover the expense. We have been setting money to the side for some time now for car repairs, so there was enough. Before we got rid of our credit cards, I would have simply heard that number and immediately reached for the credit card and told myself “I’ll worry about this later.” Our new reality is that we have to pay for this right now! The rest of our decisions until payday have to take into account this unexpected car bill. Before, we would have just cruised along and told ourselves that we’d take care of this later when the bill arrives and spend as usual. That usually meant spending the money that we set aside carelessly.
Our Financial Day-to-Day
Here’s in a nutshell how the finances work in our home. We’ll cover the more detailed budget soon, and it’ll make more sense before we’re done if it doesn’t now. On each payday, we take a trip to the bank and withdrawal a set amount of money. This amount of money is determined by our budget. We determined that anywhere we were swiping a credit card in person, we had to have cash in those situations. After withdrawing the money, we bring it home and divide it out into simple paper envelopes marked with category names and a dollar amount. Each family will have different categories in their envelope system and different levels of micro-managing their expenses. We financially live a fairly simple life and our budget reflects this as we only have 3 or 4 envelopes (depending on the holiday or occasion). The 3 envelopes we have all the time are “Groceries & Town” (for anything non-automotive), “Gas & Auto” (to keep the cars and tractors running) and “Tithe” (for our church). Occasionally we’ll need to save for a short-term goal and we’ll add an envelope for that. After we bring the money home, we divide out the cash into the amount stated on the envelope. As needs arise, we pull out the appropriate amount of money, look for sales and deals, grab any available coupons and buy what we have to with that cash. Over time, we have learned about how much we spend in each category so it usually lasts until next payday when we repeat this process.
The Real Power of Cash in Envelopes
Here’s the best and the worst part (usually depending on how far payday is away), when the envelope is empty, you have to make a choice. You can go without, you can borrow from another envelope or you can go to the bank and withdrawal more. No matter what you do, you’re not right or wrong in anyone else’s eyes, because it’s your life and your financial situation. The entire idea and purpose of the envelopes is to keep you from mindlessly veering off the side of the financial road and wrapping your car around debt. The most frugal folks will do without. They’ll find another way, use something they already have, sell something they do have or just suck it up and barrel on through without whatever. Others will realize that maybe this month they don’t need as much in envelope “A”, but their envelope “B” is nearly depleted so they’ll move some money over and note it for next month/pay period. Others will consider the situation and realize that some more money is needed to cover the situation and withdrawal it. We have been all 3 of these types and we’ll continue to be all 3 of these types as we go through life. Again, the idea is to think about it, not just mindlessly swipe plastic and deal with it later. Before we wrap this entry up, we want to talk about an unexpected perk of paying cash that we discovered along the way.
Change for the Better
Change: those coins that rattle in your pocket and purse that people seem to forget about. While some people may consider it a curse, we consider it a blessing because we found that it allows us to sneakily save for things off in the future. Every once in awhile, we’ll find a rare coin or a silver coin and they’re fun to hold onto. However, change is now how we fund most of the smaller (usually unexpected) trips that we take through the year. It may sound sound cheap, frugal, dumb or whatever, but it’s what we do. Since we use cash EVERYWHERE now, we ALWAYS have change laying around in pockets, vehicles, bags… On small transactions every day, it’s not uncommon to have $2-3 in change by the time we come home. This change adds up quickly, and the best part about it is that it’s sitting outside of your budget. Not only that, but in the state that it’s in, you can’t really take a bunch of change and go make a large purchase reasonably. You have to go to your local bank or credit union and cash it in and that takes a bit of effort. If you want to make a spur of the moment purchase, you’re not going to do it with a 20 pound container of change. This gives you time to think about what you’re doing and consider if it’s really necessary or worth it. A lot of trips we take, we’ll save up (with our budget) the amount we need for lodging, and then cash in change to fund eating, gasoline and just general “I want that” purchases along the way.
In our next entry, we’re going to finally look at the other half of what helped us get onto the right course: our budget.