Monday, January 24, 2011

Saving Money in 2011: Don't Accumulate Debt, Pay Cash

In a time where all of our costs seem to be rising and our salaries aren't increasing there has been an excess in talk about people having to take on 2nd (or 3rd jobs) or try to cut back majorly on their expenses.  A blog series on 'saving money' (not just couponing) seems not only appropriate, but overdue.  So over the course of this week I'll be sharing tips about how the Gregg's did it successfully in 2010.  Keep in mind, these are all ideas, and the Gregg's aren't any of you out there.  Part of making this work is making it adapt to you, but don't be afraid to try something you would never consider.  Sometimes those are the things that make it work for you.

Let me start with a brief synopsis of me:  I've worried about money since I can remember, literally.  I was the 4 year old looking over my mom's shoulder at the bank to see how much our accounts had in them so I could feel 'secure'.  (As if I knew what was really needed to be 'secure' at that point.)  I carried this through my childhood, adolescence, and into my marriage.  When Aaron and I got married, he had to be in charge of making out bills, because I couldn't handle the stress of it.  Many times I'd sit and cry. 

Fast forward to when we lived up north, and we were encouraged to be in a small group (a great thing for your ministers to be fed outside of what ministry they are asked to do).  The class that happened to be meeting at the time was Dave Ramsey's Financial Peace University.  Now, I would love to say we took all of the ideas and incorporated them right away, but there was so much change in our lives at that point that we were able to take a couple ideas and make some good financial decisions for the first time.  (Do keep in mind that the revelations from this class did lead us into 'financial peace' for the first time... for me, ever, and if I get real candid about our budget, you'll see that it's not because we have an excess of spending money.)

One of those decisions?  We didn't have a second car at the time (we'd just gotten off the road), and one thing that made an overwhelming bit of sense to us in Ramsey's advice was that purchasing a car is NOT an investment.  Think about it, buy a new car and drive it off the lot and it immediately loses a great deal of value.  You never 'earn more' on a car (unless you fix up an antique or something, that's not what we're talking about here), you always lose money.  So the idea was to save up cash,  buy used, and to buy something within the cash budget you have set out.  NO CAR LOANS.  (Again, a mortgage on your house is normally an investment, you should earn from your house, if done properly of course.  A car offers no return, so why would you want to pay interest on something you are going to lose money on anyway?  Exactly.)

So, our first wise financial decision was to take $3500 out of our savings and buy, outright, our second car.  We researched like crazy to find that $3500 miracle vehicle that we'd at least be able to get 3 or 4 years out of.  We finally decided on a Nissan Altima, which we bought in 2008, and Aaron's brother is still driving around today (despite a major hail storm that took out all of the cosmetic appearance and his back windshield and a few minor fixes here and there.)  We've been without a second car payment since, well, basically 2006 when we sold our vehicles to get on the road. 

Our goal is to pay our other one off early in order to free ourselves of that $190 car payment every month, then take what we'd be paying in a car payment to put in our savings to later purchase another car with cash. 

So our first big lesson was this:  big purchases, or small ones, aside from your mortgage, should be bought with cash, not with credit or by borrowing money.  When you receive your paycheck, wouldn't you want that money to feel like it's yours rather than everyone elses that you are indebted to?  I would. 

So if you're looking for new furniture, start saving up.  If you're looking to buy a car, start saving up.  Need a new refrigerator?  Start saving up. 

Another tip about paying cash (real cash, not with a debit card or check), you can haggle for things you never thought you'd be able to haggle for!  You'd be surprised how cheap our $1000 couch got after haggling, price matching, and paying in cash!  Our couch that we bought going off the road went from costing us $999 to $499... $500 in savings because we asked for it and didn't have to finance it. 

What could you do with that extra $500 in savings???

Stay tuned, next in the series:  Creating a Budget.



  1. thank you for doing this series! will and i are just starting out with the dave ramsey stuff so this is very useful for me:) i am so interested to see how others are making it work for them!
    r kremer

  2. Dave Ramsey is great! We are firm believers in his method. (and he's funny too ;)

  3. Very well written! Looking forward to your series :)Oh and I agree 100% you can haggle anything down in price! lol