The Lost Art Of Saving To Pay Cash For Purchases

Posted on March 16, 2008

Somewhere while I was digging out from $70,000 in debt, I learned that you had to be able to save and actually pay cash for purchases in order to avoid debt. Growing up this was not something that had been instilled into my thinking about money. It is something that doesn’t get much attention, but it is a needed tool in order to achieve financial success. So, let’s talk about it.

The whole system starts by extending your financial vision past the current day and thinking about purchases and bills that will be due months down the road. Then you just need to divide the bill/cost by the number of months until you need the money to come up with the monthly bill amount that will get you enough cash in hand.
For example, we know that we will need a new TV by Ferurary when US cable/antenna service switches from analog to digital. We expect to pay about $800 for a TV, so we divided that by the 12 months in the year and added that $66 dollar monthly bill to our list. Each month I transfer the money from our checking account to an ING Savings account labeled TV. When the time comes we should have all or most of the funds needed.

It really does feel good to have a plan for your money. I remember the feeling like we had really turned the proverbial financial corner when we started putting away $100 a month for auto insurance rather than paying the $3 a month service for so that we could do payments.

If you are still getting out of debt, the same strategy applies. If you don’t plan for future expenses, you will find yourself back in debt when these so called ‘unexpected’ expenses come up. With a little planning and discipline you start to realize that they aren’t unexpected at all, and that by having a plan for your money you can be in control rather than your bills.

» Filed Under Credit Cards, Financial Succes, Psychology of Spending

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6 Responses to “The Lost Art Of Saving To Pay Cash For Purchases”

tracy ho (3 comments.) on March 16th, 2008 11:53 pm

I do agree , make commitment for emergency is very important , think for family first you will never know when your needed most ,

Thanks for sharing ,

Tracy Ho
wisdomgettingloaded
rachel on March 17th, 2008 4:18 am

One of my favorite financial writers had this to say about saving to pay cash (Warning: this does get a bit racy.):

Here’s the trick (if it’s too late for you, write it on some young person’s forehead–backward for easy reading in the mirror): A luxury once sampled becomes a necessity. Pace yourself!

You say you don’t particularly mind not having a remote-controlled clicker for your TV? I can state with some assurance in that case, you’ve never had one. Touch-tone dialing? Caller ID? Microwave ovens? Seaplanes vaulting Friday-afternoon traffic? Stock markets that only go up 20 percent or 30 percent a year? These are things it’s a cinch to be happy about before they’ve been invented; quite possible to be happy without even after they’ve been invented; but so awfully hard to be happy without once you’ve gotten used to them.

Pace yourself! Live a little beneath your means. Don’s go into hock buying some whizbang&olufsen sound system right out of college; make do with one of those three-in-one $279 mail-order dealies I still use. Tease yourself with anticipation. Ease the fingers of your aspiration up the inner thigh of your cupidity. Tickle your fancy

Of course money buys happiness. But both will last longer if you remember the importance of foreplay.
Mr. Debtbeater (4 comments.) on March 17th, 2008 8:06 am

This is actually something we’ve started to push on our children very aggressively. For awhile they were able to pay us back for things that they were saving up for and almost had. We were ENABLING our children’s debt habits!!!

Well, no more. They have to save up for what they want, and SO DO WE. Hopefully they’re learning a thing or two about only buying what you have money for instead of borrowing all the time.
Sue (11 comments.) on March 20th, 2008 3:58 pm

Hi. I am a little confused by the need to buy a new tv. I thought just a converter box was needed if you don’t have cable or another service.
http://www.commerce.gov/NewsRoom/PressReleases_FactSheets/PROD01_005167
“Secretary Gutierrez highlighted the digital television transition options available to consumers that rely on free, over-the-air television. Those with older TV sets without a digital tuner, who get programs free by using an antenna, have three options to consider before the February 17, 2009 transition: purchase a converter box and connect it to the TV; connect the TV to cable, satellite or other pay TV service; or buy a television with a digital tuner.”
“Commerce’s National Telecommunications and Information Administration (NTIA) is administering the TV Converter Box Coupon Program. The program permits U.S. households to request up to two $40 coupons to purchase eligible TV converter boxes for analog televisions, which rely on over-the-air broadcasts. Converter boxes will keep analog televisions working after February 17, 2009, when full-power television stations convert to all-digital signals.”
The Happy Rock (163 comments.) on March 20th, 2008 5:27 pm

@Sue. You are right! Right now we have cable at a reasonable price, but I am not sure that we will be next year. If that is the case our TV is almost 12 years old and would require converters. I figured we wouldn’t be eligible for the free converter coupons, but after looking at the link you pasted there doesn’t seem to be any restrictions.

So what I am really saying is that we(mostly me) were really just using that as an excuse to treat ourselves to all of the TV technology enhancements that have been made in the last 10 years. It is something that I have wanted for a while. Labeling it s need was a bit of a misnomer!
Sue (11 comments.) on March 20th, 2008 8:14 pm

Thanks. Just wanted to make sure that I wasn’t missing something. We don’t have cable and we are going to try the converter box to start.