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The Lost Art Of Saving To Pay Cash For Purchases

by The Happy Rock on March 16, 2008

control-your-money.jpgSomewhere 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.

{ 15 comments… read them below or add one }

tracy ho March 16, 2008 at 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

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rachel March 17, 2008 at 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.

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Mr. Debtbeater March 17, 2008 at 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.

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Sue March 20, 2008 at 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.”

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The Happy Rock March 20, 2008 at 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!

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Sue March 20, 2008 at 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.

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Pete @ biblemoneymatters.com May 27, 2008 at 10:46 am

We just bought some converters for our Old tvs as well – $20 after the coupons and we’re set! The tvs feel like new ones (to a degree).

I agree completely about saving up for purchases. We just started the Dave Ramsey financial peace university -and he really stresses paying cash for everything. I’m looking into setting up a separate savings account that allows separate accounts – It sounds like ING allows you to do that?

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The Happy Rock May 27, 2008 at 11:19 am

@Pete – ING let’s you have as many savings accounts as you want. I currently have ~12 savings accounts, one checking, and one mortgage through them.

Recently when I was on the phone with ING support and they even called them accounts/goals.

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lee @ strategiestosavemoneynow.com October 21, 2008 at 7:13 pm

Much of what we see and hear today is based on “instant gratification”. If you want something you just go out and charge it – why should you wait? This attitude, of course, is what gets many of us, including myself, into trouble.

But there’s a lot to be said for waiting and saving up for those major purchases. You actually appreciate them more!

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tina weindel January 3, 2009 at 12:06 am

I am in debt in the tune of $10,000 for a resort I bought into. I am going to get rid of all of my credit cards and credit lines. I have excellent credit but I am tired of being in debt even when I have became debt free 4 times. I plan on being debt free in two years or less and paying with only cash. I will log in in 6 months and post how I am doing.
Tina

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The Happy Rock January 3, 2009 at 12:40 am

@Tina – Glad to here it. Feel free to drop a line if you ever need some support or encouragement.

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tina weindel January 11, 2009 at 11:11 am

I closed two credit card accounts. The first one was easy because it was a new line that I used to buy a lawn mower when mine died.
However, the second one was a little more difficult . First of all it was a card that I have had for five years. I have a great credit history with them. The card company tempted me with lower interest rates etc… but I held firm. But part of me had second thoughts about closing the account. I am losing 5 years of great credit history(keeping in mind that I dont plan on using credit again this really should not matter)and I felt like I was really losing something important.
Its been 4 days since the account has been closed and now i do not miss the card.

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Basil February 14, 2009 at 8:26 pm

This strategy can be useful when you don’t have a lot of money and need to be in control. This can also be applied to various insurances, for example, instead of paying $5 a months for your washing machine insurance, you can put this amount into your saving account and use it as an emergency fund.

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wm Deegan August 10, 2011 at 10:20 am

I notice that you get donations to pay for the upkeep of the site. Thats a great idea and completely understandable. But why alow ads that sre trying to get people back in debt w/ outradgess intrest payments. ie the google ads on top of the site.??

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wm Deegan August 10, 2011 at 10:21 am

Forgive the spelling…in a hurry.

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