Life on A Cash Basis

Cash

I was reading an article at Fire Finance about the number of people who live without a bank account.  Fire Finance was stunned to find that 17 million Americans have no bank accounts.   I was not so surprised.  Having worked in various situations with low income people, it is common among them not to have a bank account.

With 13 to 17 percent of the population living at or below the Federal Poverty guidelines, it’s not surprising that few of them have checking or savings accounts.  They generally have income once a month or no regular income at all.  They cash their checks at the closest available place and what cash doesn’t go to pay the monthly living expenses, they keep the little remaining cash close at hand.

Life on A Cash Basis

While I am not one of the 17 million Americans without a bank account, we do live life on primarily a cash basis.  We have a checking account and a savings account.  Our checking account is used solely for paying monthly bills.  We do not use it for shopping at the grocery store or for gas or daily incidentals.  Our savings account is online and it is used solely for an emergency fund.  It is linked to the bank account for easy transfers in and out of checking.  We ordinarily keep a $5 balance in the checking account.

I know that we are not the norm for Americans because we pay for most things with cash,  good old American greenbacks!  We don’t use credit cards as a matter of fact, neither of us even own a credit card.  We also do not routinely use our debit card.  We do own one of those but generally, it is only used to check the balance if necessary when the bank is closed.

Like most Americans that Fire Finance classifies as underbanked, we don’t have a great deal of income.  We generally are living off of less than a thousand dollars a month.  While this is well below the poverty level, it doesn’t feel like we are ‘poor’.   I can’t think of a many things that we want that we don’t have.   I can’t actually think of many things that I had when I was earning over sixty thousand per year that I don’t have now except for bills.

While many people will find this a shockingly low income, we live quite comfortably on it most of the time.  We don’t have any real debt other than a small loan on the farm so what cash we have goes to the daily essentials of living.  Neither of us want to go into debt so we don’t even consider buying and financing a car.  Quite simply if we can’t pay for it, we don’t get it.

If there is something that we want which we can’t afford to pay for with cash, we do one of two things; we either save up for it or we  make a plan to make enough money to pay for it.  For example, we seriously need a tractor.  There are just some things that it is difficult for two people to do on a farm without one such as moving 800 lb hay bales or plowing our large garden and mowing 19 acres of pasture.

Even a small tractor is a large expense usually costing between 5,000 and 10,000 dollars so we do not have the cash on hand to purchase even a used one.   Our plan is two fold rather than getting a loan, we will save as much money as we can to put towards the tractor and we will also start selling some things to pay for the rest of it.  The final and probably hardest part is being patient.  We will wait until we have saved up enough money and then wait to find a really good deal on a used tractor before we purchase it.  While we wait, I will research the prices so that when we find one, we will know what it is worth.  I expect that it will take us a year to save enough money but if we financed it, we would be paying for it for five to seven years.

In the past we would have borrowed the money without a second thought and because of that we would have ended up not getting a very good deal.  We would not only have paid too much for the tractor, we also would have been paying interest on it for years.  Now we are forced to do our homework and so will get a better deal.  We will also have the bargaining chip of paying cash when we find it.

We got our truck the same way.  I spent months researching prices and searching online for a truck that we could both afford and that would meet our needs.  While I searched, we sold our old truck and saved enough money to purchase the newer truck.   When I found the truck of our dreams on craigslist, it was about 200 miles away and we bargained over the phone for a lower cash price.  We saved $500 off of his advertised price because we could come that same afternoon and we were bringing cash.  We saved an additional $1000 over what we had found the same truck priced for locally. We saved 8 percent by not having to pay interest on a loan.

Even smaller purchases sometimes come with a savings if you pay cash.  Several of the local gas stations give a discount on gas if you pay in cash.  It makes sense for them since merchants pay 1 – 3 percent on credit card transactions.  It’s nice of them to pass the savings along to their customers.

Even though we don’t have a lot of income, we live a pretty good life.  We grow most of our own food and we generally have enough to share with friends and family.  We don’t go out to the movies often but then we do spend quite a bit of time with our extended families playing cards or just socializing.  The food we eat is generally homegrown and fresher than store bought.  It doesn’t contain all of the pesticides and chemicals of processed foods.

There are some sacrifices when dealing only with cash.  There are times when we do without some things because we don’t have the cash to pay for them right then.  There are times when we miss a really good deal on something because we are unwilling to borrow money but overall, the money we might have saved by buying it right then we would have spent on interest on the debt.

For me, our lifestyle is based on cash.  I can see it, touch it, count it and know exactly how much we have and what we need to spend it on.  It is more of a different mindset than putting all of it in the bank and using my debit card to pay for things.  It is much more difficult for me to visualize and keep track of our finances when I used my debit card and checks to pay for things.   I have always been a visual learner but I can tell you that watching our cash dwindle physically is the best way that I have found to stay on a budget.  For the most part, we are pretty happy with what we have and don’t miss too much of what we don’t have.

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