We paid cash for a new-to-us 2008 Toyota Sienna last month. The thrill of seeing that the check cleared the bank was second only to writing the check that paid off our last non-mortgage debt. In less than four years we went from being $50,000 in debt to paying cash for mini-van. No rich uncle died and left an inheritance. No one miraculously cancelled all our debt. No one in our family got a second job. Let me tell you what did happen to position use to pay cash.
4 Keys to Financial Transformation
To get to the place where we paid cash we radically changed our attitude and relationship to money.
We set our eyes on life goals that we’d give up if we remained in debt. I share Michael Beer’s formula for change and establishing a clear vision is key. No one is motivated by focusing on what they are giving up. We are motivated when we focus on what we gain as we change our habits.
We got organized in our finances. We had not been including our non-routine expenses in our monthly budget, because frankly, those were the things that made it look like we didn’t have enough, just like I discuss here. When we quit denying that life would happen to us and around us, and instead began to prepare by setting aside monthly for things like car repair and Christmas gifts, we started to get ahead. We tracked our expense for all the reasons I talk about here.
We started saving. It wasn’t until we committed to get out and stay out of debt that we got serious about saving money. If we were going to avoid debt in the future, then we needed to have an emergency fund to rely on instead of the credit card. We began to save 10% of our net income and over time increased it to 10% of our gross income.
We can be tempted to put every extra penny toward paying down debt, but that’s foolish. Something is going to happen that requires a financial investment and if you haven’t already set aside for that unexpected emergency, then you’ll run back to your credit card. There’s nothing better to destroy morale than a relapse back to the credit card after working hard to pay off debt.
We outsmarted financial temptation. If we’re honest, we all have weaknesses and if we’re in debt, we have some kind of financial-related weakness. Marco and I decided to face the facts about these and make a proactive plan to outsmart them. For me, it was saving money. I could not do it. Every time I set money aside, I would take it right back out on something that seemed like an emergency. I outsmarted that by opening some new accounts, setting up auto transfers into them from my primary checking and making it generally difficult and painful for me to gain access to the money. No more savings accounts attached to my primary checking. I’d tried that too many times and failed. New accounts, in new banks, with very limited access to get the money back out.
Time to Buy
Marco signing the title at our kitchen table
These same principles we used to rapidly pay down our debt are the same ones we used to save for and pay cash for our van. After making the last debt payment we knew that we’d need to replace our older vehicle at some point. Our trusty 1996 Toyota Camry would not run forever, no matter how much we wanted to believe otherwise. We took a proactive approach and saved money in advance, long before the car died.
We saved. And we saved. And we saved. Money didn’t fall out of the sky. We made car payments to ourselves and set the money aside in the bank. We were determined to be ready, with cash in hand, when we needed a new vehicle.
The time to buy snuck up on us. We expected to wait until our Camry quit running, but when Toyota prices started to drop earlier this year, we knew we had to jump. Looking for a car can be overwhelming, which is why we asked for help.
Someone to Help
My husband loves cars and has watched prices on mini-vans for years, but he is a busy stay-at-home dad and grad school student. Shopping for a great value on a van would be labor-intensive, right? Make phone calls. Set appointments. Test drive. Repeat. Find one to buy. Negotiate. Sign paperwork. I’m tired just thinking of it. We used an auto broker to do all that legwork for us.
In steps Lemire Consulting. Dennis Lemire shops for your car for you, sort of like a real estate agent does a lot of the house shopping work for you. It’s a free service for consumers and a huge timesaver and headache-reliever. Dennis checked with all the local dealers, went to auctions, and he’ll even check out private party sales, all to find your perfect vehicle. Our vehicle was delivered to our house for a test drive and we bought that first one. Not only did we test drive it from home, the dealer delivered it here and we signed the paperwork here. Can you say convenience? Can you tell I’d recommend Dennis? He’s great! (Dennis also negotiated a small repainting job into our deal and the Abra Auto Body in Forest Lake, MN did a fanta-bulous job. I’d recommend them if you need repair work done)
Carrie paid cash to the car dealer for min-van with a personal check (I didn’t get a picture with Dennis. Whoops!)
With cash in hand, we wrote a check to the dealer from whom we bought it. We saved about 25% off the blue book value because we bought at a strategic time. Marco and I also noticed that we were less tempted by fancy upgrades because they all cost money. Paying with cash is a great deterrent for overspending!
Next time you see you me, I might be tooling around in my swanky, paid-for Toyota Sienna or maybe I’ll be in our other paid-for vehicle. Set your sights to do the same thing and avoid car payments to the bank forever. Make them to yourself in advance, instead. If we could go from 0% down on the car we bought in 2004 to 100% down in 2010, you can do the same.
Your turn: Maybe it’s not a mini-van or a vehicle, but what is the next thing you are aiming to pay cash for instead of borrowing like you’ve done in times past?