MORE CASH – Less Debt!

Do you want to have more CASH and less debt? The holiday season on us, and the new year coming – it’s a great time to look at how you can get out of debt and live a better lifestyle!

If you feel yourself saying, “I just don’t have money for that…” or “I really want to invest in my health, but I can’t figure out how to get that money…” let’s find that way! It is possible! I have done it!

The secret … the very first step in this process is …GETTING OFF your credit cards and getting on a cash-only system. Want more cash? Use only cash.

We learned this quickly and easily. It’s actually not that hard. It may seem odd and very difficult if you are in the cycle of “using a card and paying it off” (wink wink) each month. We are a society of swipe, swipe, swipe, but it’s easy to get more cash by using cash.

Here’s what happened to us. We bought a fixer upper 10 years ago. We gutted and restored a 2160 square foot home over the course of nine years. We spent over $50,000. We used credit cards and loans to do it and by the end, we were maxed out. We used cards for everything and never functioned on cash. We didn’t have any. We decided to sell that house and move. It paid off most of the construction debt we had. We needed lower energy bills and needed to get out of the construction debt. We also had $100,000 in student loans outstanding over the years of the construction as well. We had our mortgage on top of all of that. Then we had a kid. We needed relief.

Over the course of this month, I am going to walk you through how we are getting out of debt and you can too. And I mean 100 percent debt free!

Step 1: Consider open credit card balances as debt
All open credit card lines are considered debt to put into your new budget (how to do a budget coming up). If you are lucky and have enough income (or savings) to pay off the credit card cycle you are in PLUS have cash for the month ahead then you should start there. That means you will need to have two full months of your budget in cash.

However, I am going to guess that’s not possible or else you wouldn’t be in the situation you are in. That’s the thing with using credit cards! You are ALWAYS a month behind. You are never paying for what you are buying now, you are always paying for what is already gone. It’s a horrible cycle. Plus you are paying MORE for everything you buy because of the interest on your credit card. Who wants to go to the store and pay MORE for something? Nobody. We want to get out of debt!

You might think to yourself (we sure did and tried it all!), if we keep track of our swipes better we will be fine. We will have all the cash we need at the end of the month. Nope, it never ever works that way. We used to track our “swipes” like a checkbook, yet somehow every month we were short $100-300! Swiping is easy. TOO EASY! If you look in your wallet and there’s no cash it’s easy to walk away from a purchase.

What about using a debit card isn’t that better?
No, it’s not any better and let me tell you why. First of all, if that card number is stolen online or retail locally the process is NOT the same as a credit card. You don’t just call up and say I didn’t buy that and they automatically give you the money back and issue a new card. When it’s your checking account all the cash that was once there is GONE! Yes, it’s gone (believe me, it’s happened to us – we are just that lucky!) Not only that, but they freeze anything left in there until their “investigation” is done. That means you literally have no money at all. For real. So using a debit card isn’t the answer. You run into the same problem of swiping until you literally have nothing left anyway (or you bounce your account – yup we have done that too).

The ONLY thing we use a debit card for, now, is gas. That’s it. It’s more of a hassle to pay with cash (although around here we save over $.10/gallon by using cash), especially if you have a child in the car with you.

Step 2: Start Cash Envelopes for Each Expenditure Item
Using a cash envelope helps you keep all the cash for the upcoming week (or two – we work on a bi-weekly budget here) straight. Nobody is using cash that’s not allotted to the right item.

Here is what we do. My husband needs cash for his two weeks. It goes into an envelope labeled with his name. I need my cash for two weeks. I have my own. We also have envelopes for groceries and gifts. These are the only things we need cash for, so those are the only envelopes we have. You might have more people in your house that need cash, so you may have more envelopes. You might have more budget categories to track with cash, so you will need more. When the cash is gone it is gone until the next budget/pay cycle. There is NO going to the bank for more! Not for your envelopes!

The only time we allow a trip to the bank for cash is when an expense pops up that is from our savings account. Those things are emergency fund cash amounts. We have purposely put money in the savings for these items so it is already allotted for those purchases. Nothing else comes out of our checking accounts after pay day. That means what you see at the end of paying bills is truly what is in there. It will not change until you get another pay cycle. What a relief right?!

How do you keep track of where the cash is going out of the envelope?
At first, you will want to track this very closely. Especially in the first three months to help you see where you are spending money. It’s very helpful if you go over budget. Then you can see what happened and what you didn’t figure into your budget that you need to.

We use an app called ClearCheckbook.com. It’s also a browser-based program online. It’s easy to use while tracking bills and more. (More to come on this). This program allows you to set up multiple accounts that all sync together. All of your envelopes are in here. This is very helpful if you are allocating money to a child and you want to see where it’s going. Everyone logged in can see all the accounts. You can pick and choose what you have in there as well. You do all the setup yourself.

I will talk more about the features of clearcheckbook.com in future posts as well. It’s awesome. (It’s free, but does offer advanced features for payment).

Step 3: Set aside cash for savings
This is a must and it’s every time you pay bills it goes in just like a bill. If you are like us we never had money for savings and we never had any money in a savings account. It seemed impossible but what’s shocking is you will have MORE cash by using cash. You are saving money on interest fees like you wouldn’t believe. You probably never thought about the impact of the fee you paid because you were so in debt it didn’t matter. BUT, if you look back at your statements and see that fee that’s the money you could start with saving! If you just can’t figure out what to do -I will help this week. Try starting with that interest fee amount and split it into each paycheck and put that away. At least it’s going into your wallet!

You will notice a significant amount of extra cash after the first few months in your checking. Your savings will be growing. It will be shocking. There was even a point where I said to my husband, “Did you make some type of deposit into our savings account?” He was confused. The amount was larger than we had ever seen it in over 10 years. It was truly all from the tiny bit of money we saved each paycheck. Shocking!

Say you don’t really have the money from the interest fees because it’s gone to your mortgage! Pick something small. As little as $5 to start. Once you see the amount in your checking account increasing you will feel more comfortable expanding the amount going to the savings. We started at $20 a paycheck (we started higher because we needed to save for car expenditures and upcoming house projects). After the first two months on cash and a budget, we were able to go up to $50 and now we are up to $150 per paycheck. We plan to send more if we can as we continue to save using cash and smart budgeting.

I will be financially honest here so you know how and what we did to make this work. First of all, we are still in the midst of all of this and it’s working! That’s why I am sharing. We started in January 2016. We have paid off nearly $60,000 of debt from 2016-2018. I had $45,000 in a student loan that has been paid off, we have paid over half of a newer car we purchased in this time frame – in less than half the loan time, no credit card debt, and have taken a savings account of nearly nothing to 5 times what little we used to have in there. We paid for a new furnace and AC unit for our home with cash as well, and have returned all but a few hundred dollars of that to the savings account in only a few months!

You are wondering what our income and budget is? We have one teacher’s salary of just under $70,000 (he’s been there 17 years!) and one part-time salary of about $30,000. We have a newer mortgage, all the household expenses that go with that. We currently have about $50,000 in student loans combined, and a few thousand left on a car loan that will be paid off in half the time of our loan.

We hope to be debt free in 5 years. You might be able to pay down faster. If you have more income than we do, or a less expensive home or budget, you may be able to put more money toward the debt to pay it off more quickly. A lot of people can.

Next up is Tips for Getting Out of Debt. Some tools and action steps to begin this process now! It will help you get started to think about a budget, and cut down expenses. Once you know how to do this – you will realize you CAN afford things you want and you will KNOW how to get them without being in debt! Check back next week!

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