Could You Live An ALL Cash Life?
Don’t PANIC! Living and loving the all cash life does not require you to give up your debit cards and credit cards, well perhaps your credit cards.
Living and loving the all cash life is about moving away from a dependence on debt, creating more options for your family and freeing yourself to be able to love, live, and give according to your dreams. The utilization of debt to fund the “American Dream” has turned into the path to an American nightmare. The US now carries more than $850 billion dollars worth of credit card. I’m not even sure how many zeros are in one billion.
Clearly the use of debt can help make the opportunity to receive a higher education, purchase a home or start a small business possible. However, many are stuck in a habit and mindset of using debt as a way of life or to fund a lavish lifestyle. The “opportunity” to attend the prestigious private college you love was a great experience while it lasted, but graduating with no job in site and a $50K student loan due was clearly not the “opportunity” you were seeking. Here are 3 quick tips to start living and loving the all cash life.
Step 1: Find your inspiration to take control of your financial future and use it to fuel your journey to financial freedom. What truly inspires you?
- Being able to live and follow your dreams
- Being able to spend more time with your kids (well maybe not)
- Being able to tell your boss peace!, or any other choice word that comes to mind
- Being able to travel and see the world
- Being able to make yourself ‘Recession Proof” so regardless of what happens with the economy you’re in a good financial position.
Step 2: The Debt Detox
Removing the financial impurities from your life starts by creating a spending plan; this is code for budgeting. I think it’s safe to say a great deal of us don’t live on a budget. If you’re like me, you made the money, paid the bills, and spent whatever was left over. I didn’t get on a budget until I had almost completely drained my savings account. Not living on a budget is one issue, but a bigger issue is not having a clue how much you are actually spending from day to day. Here’s where you start.
- Reflect Back & Track Forward – Take a trip down memory lane through bank statements to see where you’ve been swiping all your cash away and begin to track your current spending. Please note, there will be an overwhelming desire to kick yourself when you see the truth.
- A 21 day All Cash NO Credit/Debit Fast – This will be an eye opener because living with cash gives you a better idea of what you’re spending. Letting the cash go won’t be as easy as swiping your card. This will feel very uncomfortable at first but it’s your first step towards financial discipline and eventually financial freedom.
- Create a Budget with Real Numbers and All of Them – The budget has to have real numbers, not the ones you keep in your head. It also has to have every single item you spend money on including quarterly and annual expenses that always seem to come as a surprise (ex. birthday’s and Christmas).
Step 3: Learn the A.R.T. of Borrowing Wisely
(A) Amount – Borrow the least amount possible for what you need. I’m sure the 200k house would be really impressive to your friends but, hello it’s only you and your dog, Scruffy. Who is going to furnish, heat, and cool all that empty space?
(R) Rate – Borrow for the lowest rate you can get. Now this doesn’t sound like rocket science, but more commonly people make purchases based on the payment never having a real understanding of the rate they are getting. If you’ve ever purchased a car you will notice the salesman always ask, “How much do you want your payment to be?”. The salesman doesn’t want you to focus on the rate or the term of the loan, which determines the total cost of your loan.
(T) Term – Borrow for the shortest term you can afford. The term “afford” means living on a reasonable and at least halfway sensible budget not filled with eating out daily or $5 coffees every morning. Remember when you borrow money you are banking on a future you cannot see.