*Disclaimer: If you are uncomfortable with transparency about finances, you probably will not enjoy this post.*
Luke and I used to be financial wrecks. We had accrued around $35,000-$40,000 in school loans from attending our wonderful alma mater. We also had a car loan, because you can’t have a car without a loan, right? (*Puke*) AND we believed the bank when they said we could afford to build a new house (that was pre-economic-craziness), so we got a mortgage that we couldn’t afford (probably like a good majority of those with mortgages) – $176,000. We’ve had numerous credit card debts, and medical debts (having 4 babies in 4-1/2 years costs money!). All that to say, we wish we had been counseled a long time ago to do everything we can to avoid debt.
That’s what we are already teaching our young children. We don’t want them to be slaves to their lenders, like we are.
So, PRAISE THE LORD, we have paid off everything but two student loans and our mortgage! We are down to $12,343.57 in student loans and $167,299.09 for our mortgage.
We are eagerly anticipating the moment we can permanently break up with Sallie Mae – slated for this July. The debt snowball will then allow us to pay off the remaining loan, hopefully within a year.
And if we could sell this silly house, we will rent for a period of time, until it’s financially wise to buy again.
Then we’ll be DEBT FREE! I can’t wait!
So, the real reason for this post… (Yup, that was just the intro!)
Many of you know that we are big fans of Dave Ramsey. Part of his financial wisdom involves using cash for purchases. You say, “What? Are we living in the stone age?” No. We are living in the age where credit (and even debit) purchases are just too easy.
You might even say, “Well, I earn rewards and pay off my card each month. I’m very responsible.” Okay. I’m glad you pay off your card every month. And it probably feels good to earn a free hat, or $20, or whatever your lender thinks will keep you loyal to their company.
But I’m not here to talk about what feels good.
I just started using cash in 2010 for three budget categories: groceries, Wednesday dinners (for Family Night at church), and entertainment (i.e. date nights and/or eating out). To be honest, the first month didn’t feel like it made a difference in the world to our budget.
And then I started to realize the implications of using cash.
First of all, cash feels good. Yes, it’s a little awkward to use a slower method of payment than the guy behind me in line. But goodness-gracious, he can just wait two extra seconds. (Harumph!) There’s just something about the feel of cash in my hand. It’s hard to let go of. Unlike my debit card, which actually feels good to swipe.
Cash is also limited. I only take my cash into the grocery store, so if it runs out, it runs out. I can’t spend $5 more than my grocery budget, because I don’t have 5 extra dollars. It hasn’t happened to me yet, but if I get to the end of a transaction and have more due than the cash I have in hand, I will just have to have the cashier take some items off my order. Embarrassing, sure. But imagine all the money I’m not spending that I could have spent with my debit/credit card.
Not only that, but studies show (and my experience affirms) that using cash will cause you to spend less money overall. Yes, you might pay your credit card bills in full every month, but by just using cash you can actually save money.
Let me show you our numbers…
For our family of six, my monthly grocery budget is $300. (Praise the Lord for coupons!)
In 2009, I had two months where I spent less than my budget: $240.39 and $294.04. Every other month I went over. Because it was easy. The other numbers range anywhere from $309.67 to $492.16.
I was over budget by $469.38 in 2009 in the grocery category alone.
With cash, I spent $296.20 in January, $142.50 in February, and $216.32 (so far) in March.
I’ve been under budget by $244.98.
For me, cash is absolutely, without a doubt, so much better for our budget.
I challenge you to try it. Give it three months, and see how cash can affect your money-spending habits.
And if you don’t even have a budget, I urge you to get your finances on track! I already said that Dave Ramsey is great. He’s very practical. Crown Financial Ministries is also important. We actually went through their training first, which gave us a great foundation for understanding exactly whose money we’re dealing with anyway. (Everything in the heavens and earth is Yours, oh Lord!)
That is a interesting concept to do cash with just a few categories of your budget. I have never done cash because I thought it would be to cumbersome to do all the categories of your budget that way. But I think I could tackle just a few categories like you did! Thanks for the idea and encouragement!
Thanks for the encouragement. You know, I recently read on a coupon site that I should use cash. But, it really “sinks in” when someone who I actually “know” is doing this and raving about it. I’ll give it a try. Thanks for the encouragement! Had I not read this post, I may wouldn’t have made the decision to switch over to cash.
Your Friend,
Bridget
Hey Lace!!
I rejoice with you that you’ve paid off so much debt- doesn’t it feel SO good!? We were given Dave Ramsey’s book, Total Money Makeover as a wedding gift from Jon’s uncle (THANKFULLY) and started paying off student loans right after we got married. We lived like paupers for two years, but it paid off!! I’ll be so happy with you guys when you have your student loans paid for! One thing I would like to say- I am thankful that we are no longer in debt (besides our house in MI which is being rented out) because then we don’t have to focus on money as much. When we were “gazelle” intensive on paying off the loans, money was always at the front of our minds (how cheap can we go on this, where can we save money, dreaded purchases, etc). I don’t think it’s healthy to be that focused on money- even if it is for a good cause! Whether you have it, don’t have it, or are debt free- that will not buy happiness or contentedness (and I’m sure you know this, it was just my experience). Debt free does not = true joy!
Good work you guys!!
We did the cash envelope system when we were first married, and it really does make you hold on to it longer and be more careful.
We use a card a lot now, but I know if I have a $20 in my pocket, I really hesitate before spending it on something, whereas a card is so easy to swipe. Might have to go back to envelopes!
I agree with Chaeli — being too focused on money (good or bad) is no good…if only we didn’t have to use it to pay for everything:)
My parents have used a credit card for everything for years — and always, always, always without exception pay it off each month. And for using it, they get oodles of airline miles — which we use to travel to go see them or have them come out here. So for them, it’s totally working and worth it — we don’t have the discipline to do what they do, though, that’s for sure.
Budgeting is the way to go — it’s amazing to watch where your money goes and how quickly it goes!
Renting is a tough one, because then the money is just gone — whereas, with a house you actually have an investment. We owned a house in Texas, where things are ridiculously reasonable, and we’ll never own a house here in California, where things are ridiculously unreasonable:) My husband says we’ll never own again, because home ownership is such a pain (fixing things and such), so for now we rent…with a rent payment that’s 4 times what our mortgage was for our house in Texas. Moral of the story: Move to Texas!:)
I would argue that now is the time to buy a house, albeit a smaller one than you have now. The market is low, and houses will only gain value at this point.
Erin M and Bridget – I’m glad I could encourage you this way! Let me know how it goes!
Chaeli and Cara – I agree with you, partially. God’s Word tells us that the LOVE of money is the root of all kinds of evil, and that we cannot serve both God and money. We know that is true. So, if the love of money is what’s driving our focus on it, then it certainly is unhealthy (and sinful). However, if our love of JESUS is driving our focus – so we are encouraging others to steward GOD’s resources well…well, then, I believe that’s not only HEALTHY but GOOD.
Topher – I would agree that now is a great time to buy a house, for people who are debt-free and have their emergency funds built up (not to mention a down payment for that house). Unfortunately, that’s not where we stand. We NEED to rent for a period of time in order to get our remaining loans paid off, get our emergency fund built up, and save enough $ for a down payment. Trust me – we’ve crunched the numbers. And even if house values go up, we are personally better off this way. It would be nice to be a first-time buyer with a down payment in hand during this housing market, though!
P.S. Just in case our motives are in question here…We are NOT doing this financial restructuring so that we can get rich or even buy a new swimsuit every month (like I mentioned, tongue-in-cheek, in my recent swimsuit post). We are doing this so that we can use God’s resources the best way possible, to further His kingdom and bring Him glory. We look forward with great excitement to the time when we can be even MORE generous with the resources He provides us with. We don’t love money. We love Jesus and His body of believers.
whatever- money grubber.
No seriously, we chatted on google and are on the same page!
Definitely don’t think you love money, and I can tell your heart is totally in the right place. I do think it can be easy for it to subtly shift into a not good place (as we’ve personally experienced) where even when the motivation is good, the focus is so much on money, that you focus on that more than on the good thing motivating.
But I’m not saying that’s where you are at all!:)
I love your couponing posts — I did a ton of that when we lived in TX and am starting to do a better job here again:)
We too did the gazelle intensity to pay off our wonderful Cornerstone loans. John worked 2 jobs for 6-9 months and I nannied (when we just had Kaitlin) 40+ hrs a wk. It was hard and people accused us of focusing too much on money (although we didn’t cut any of our giving/gifts). We were so glad we made the sacrifice to be debt free but then we sold our smaller house (we had to move someday as it was two bedroom) and bought our “dream” house (yuck) and Dave R. was right, it was a curse! We only owned it a yr but it was one of the most stressful time in our marriage and no one has compassion as they think you are living it up and yes, that we brought it on ourselves (true but we all make mistakes!). Thankfully we sold it!
Hope to see you soon!
We are proud renters. It’s not so bad and we are so happy to be out of the big house payment! We have been looking to buy for almost a yr. Thankfully we have a down payment and emergency fund (partially because we were blessed w/ a small inheritance). It’s hard to find the right house on a 15yr mortgage and some house luxuries have to be sacrificed. We now have our top things that we are looking for in a house we can comfortable afford.
We are praying that the house sells! Keep up the good work
Kym, thanks for your comment! I love to hear other people’s stories about getting out of debt. I feel like we’re on the same page as you, except you’re a few steps ahead of us! That’s wonderful that you were able to sell both of your homes! Thanks for praying for ours – we appreciate every prayer! We’re still asking God to work a miracle here. (In this market, it’ll be a miracle if it sells!)
So, where are you now? Are you still in the GR area? I was thinking of you a few weeks ago when we attended the Church Ministries Conference. It’s our one time each year to meet up!
I saw your in-laws there, but I’m assuming you weren’t able to go?
We use cash for almost everything except the automatic payments, but all our debt payments are automatic, always on the same day each month and it nice not to have to scramble for the checkbook and find a stamp. Anyway… we do cash for groceries, gas, entertainment, and personal money. I only get $40/mo to spend however I want… that is a LOT less than when I would just swipe my card and take a new bath rug home, or a random shirt I hardly ever wore. Now I find it hard to spend my cash because it is so limited. Some months, just some, I actually have left over money, and then go spend it at Starbucks… my morning lattes are my downfall, but that’s why we limit it and if I run out on the 10th of the month… I don’t see anymore money until the next month. I actually went over one day at the store with a few items for groceries, so I had to pull a few things out until it was exactly what was left for the month. It is a little embarrassing, but trying to get in this habit before we have kids is a good thing for me. Sometimes we move money around from different envelopes, but we always feel bad and say we just stole and we usually see it’s effects sometime the next month. Anyway… my husband is the budget man and I am sooo thankful he has taught me some good habits. Because of our envelopes, we were able to go to Hawaii without using credit cards… we probably spent too much, but it was all cash we had saved and stashed away for over 12 months. We too plan to be debt free… it will be a few years, but we’re working on it… wow… this was a long comment!! And I think it’s awesome that you and Luke aren’t afraid to just put it all out there and advise people on how to be better stewards…