Simplify Your Life - Pay Cash Buy Freedom
For most people, life is feeling busier than ever, but it doesn’t have to. One way to reduce the level of stress and things in your life is to simplify your money habits. Specifically, how you spend your money can either bring simplicity to your life or bring you more stress.
The biggest example is debt. Whether you like it or not when you owe people money it weighs on you. If not for the pressure to pay them back but for the physical action of having to pay them at a later time. Sounds simple enough but I’ve always had an affliction to owing people money, even from a young age. I would refuse to borrow lunch money from someone in high school just because I didn’t want to track when and if I had paid them back. This foundation is what drove my relentlessness to pay cash for our house and to have never borrowed money from a bank. I understand that’s an extreme example and not everyone can or chooses to take that path due to various life circumstances or personal preferences. And that’s okay. The decision to never owe anyone or any bank money was a top priority for my wife and I - for us, we knew it would make life so much simpler and reduce stress levels in our home. For clarity, when I say ‘cash’ I am simply referring to money you have in a checking or savings account, not necessarily real ‘cash’, though that works too.
‘We pay cash for everything, not purely for financial reasons, but because it pays us back in time and stress reduction’
How paying cash simplifies and elevates your life experiences:
Paying cash eliminates monthly payments - If you don’t borrow, you don’t have to remember or stress about paying someone back. If you pay cash for something, it’s the last time you have to think about it. If you do have a payment that has to be month to month, such an internet bill, paying for those expenses through an automatic withdraw is a great way to pay ‘cash’.
Better understanding of your spending. Tracking your spending isn’t always easy. If you pay cash, tracking expenses is a lot easier because you eliminate having to track not only what you’ve already paid but what you have as outstanding payments. Paying cash gives you a single location to track your spending.
Greater peace of mind: When you don’t have to track payments and if and when you’ll pay someone back it gives you greater peace of mind.
Save on late fees: If you pay cash, you can’t accidentally (or purposefully) miss payments.
Save money on interest - According to this Time’s Money article, the average person spends $280,000 in their lifetime on interest. Paying cash for everything would reduce that number to $0. For most people, that not only saves you money but that just feels good.
Makes you invest in what matters - When making the decision to pay cash for everything you feel the impact of making purchasing decisions on a much greater scale. As our family expands we get asked all the time if we’ll be moving and buying a bigger house. We feel so much gratitude for having paid off our house, and the simplicity a paid off home gives us, that we don’t even entertain the concept. When paying on a mortgage, it’s a lot easier to make less disciplined decisions with your money because spending more and borrowing more is much easier than saving up and paying for something in cash.
Build gratitude - There is a significantly different feeling when you pay cash for something then when you borrow to buy it. Deep down, you know you don’t own it. You know you didn’t work as hard for it. You didn’t skimp by and save so you could have it. Life is about hardship because when you overcome it, it’s the foundation of building confidence and pride within yourself. The delayed gratification of paying cash, though it can be painful in the short term, results in a deep feeling of pride.
Cool, this all sounds good…But how do I get there?
Paying cash for everything can be challenging, so here are some strategies to get you started:
Eliminate some or all of your subscriptions, and save the cash - When we really got serious about building our savings rate and being able to pay cash for everything, the first place we looked was our subscriptions. We cut all of them off. The reason being is that these can be some of the most invasive and yet elusive expenses in your budget. Companies are amazing at making the cost of something sounds cheap because it’s only X dollars a month. For example, say your cable is only $50 or $70 a month. Well that’s between $600 and $840 a year just for cable. So ask yourself, what subscriptions do you have and which ones are you willing to get rid of?
Use that cash to accumulate for your next smallest payment- In the first bullet, we just came up with a way to save almost a thousand dollars a year. A great next step is to reallocate those funds and start knocking out your next smallest payment. Ideally you focus it on a debt payment so you can move to the next step of eliminating as many of your payments as you can.
Keep eliminating your monthly payments, until you are down to the basics: House, Car, etc. - If it’s a payment that’s not related to your house, car, and student loan debt (such as credit card debt, a monthly subscription, or something else), stay focused on paying them off until you say sayonara to those debts and payments for good.
Eliminate you car payment- Once you’ve eliminated and gotten serious about paying off things that don’t matter, start paying towards the things that do. For example, your car! The financial hipster lifestyle isn’t about driving fancy cars, it’s about driving what you need to get to point A to point B. Either sell what you have or pay off what you have. In the end, we’re just talking about a resource that helps you get places faster. The ultimate mode of transportation is a bike after all, with unlimited miles per gallon.
Eliminate your house payment - Housing is super important in our lives. It gives us shelter. Safety. Memories. A Lifestyle. But it shouldn’t define us. When you treat your house for what it is and not what you want it to be, it’s amazing how your life can change. Our houses bring us happiness but by focusing on getting rid of a house payment you can finally start to build your ideal life. It’s funny how when you own your home, moving becomes less interesting because all of a sudden the numbers become real. It’s no longer a mortgage payment, it’s cash out of your pocket or going back into mortgage land. And who willfully chooses that?
Now you can pay cash for everything! - When you’ve eliminated most or all of your monty payments, your car, and your house, you’ll find yourself able to pay cash for everything. There’s still plenty to pay for, but not nearly as much as before. Most people will think you’ve made it, because you have no debt, but there is still work to be done. Continuing to live a life debt free requires intentional living, discipline and dedication. And for some, financial freedom comes after achieving a debt free lifestyle. Financial Freedom is when you save enough money to pay yourself an income with your money and that takes time or some serious savings. The good news is you’ll be making extraordinary progress with no debt allowing you to focus on what matters most to you in life, like family, friends and experiences.
Use your extra savings to invest in what matters! - So you are now out of debt. Remember those times? Crazy! Man, the life you used to lead was so much harder when you were paying interest on the money you borrowed. Not now! You can pay cash for home repairs. Pay cash for your vehicles. Debt is no longer a word you use frequently unless you’re describing what you hate. :) You’ve worked hard, you’ve focused and now you can finally build substantial wealth. Potentially generational wealth. So enjoy this phase of your life, but also remember to give and to give back to the people that helped you get here and helped you. Whether it took you till 30 or till 60 to be fully out of debt it doesn’t matter. You’re in an exciting phase of being able to pay for what you want, but this is also when you find out that buying ‘stuff’ is not what matters. It’s investing in what matters. Your biggest reward will be the time and freedom you bought yourself to pursue all that life has to offer.