Cash is king

December 18, 2009 by Johnny
Filed under: Life of Johnny, Random crap 

So I’ve decided that credit sucks really giant hairy balls and that I’m through with it.

See, I’m now in the trap that so many people end up getting into. And dammit, I tried to be so wary of that trap. Even though I thought I was a responsible spender and even though I played by the rules of consuming very carefully, I still got sucked right in and am now like every poor asshole I used to look down my nose at, paying a bunch of money each month toward interest payments on credit and loans.

I didn’t decide that I had to have a big screen TV when I couldn’t afford it. I didn’t really over-indulge. Not at the start.

I blame it on the real estate.

If you’ve been reading this blog for a while, you may know that I have some “really awesome” investment real estate — and I’m using “quotes” around that to indicate something that isn’t “true” at all, kind of like if I were to refer to political “integrity.” My real estate, in fact, is so awesome that it sucked a few thousand bucks out of my life each month.

And, well, you can’t just let that shit go. So you have to borrow from here and there to make up the difference, wherever you can. I borrowed from my checking account, which meant that I couldn’t pay off the credit card in full each month like I used to. I borrowed from credit lines until they were full. And then in a fit of consumerist brilliance, I decided that I had to have this fantastic new lawnmower that saves me like four hours each weekend in the summertime, and so I got it… on credit.

I’m not ordinarily this stupid. Honestly. I’m not “that guy” who needs the sound system and so buys it on the 30-days-same-as-cash plan. The lawnmower was a dumb purchase (although I’d do it again; I prefer spending my weekends with my kids to sitting on a mower), but other than that, almost all of my mess was thanks to those fucking investment properties. You know, the “investment” properties.

So as I’m beginning to dig myself out of the real estate hole, I’ve made myself a few promises:

As I get out of debt, I will do so entirely. As in: Not only will all of my revolving debts go, but so will my home mortgage.

I will not use credit again. Like, at all.

My dad lives in the Italian Market in Philadelphia. It’s a quirky place. He lives in an apartment above a warehouse, and the warehouse staff is like the cast of a cartoon. There’s one guy, Bob, who quits daily and who does each job that’s asked of him fully, but then will stand in one place with his arms crossed and not move until someone assigns him something else. Bob has run for mayor, been interviewed by the news as a government secret agent, and keeps applying for professorships at universities. Last week, Bob demanded double the salary of a woman with one arm because he has two arms. True stories, all.

But another quirk of the Market? Everything is done in cash. Everything.

Every worker is paid in cash at the end of each day.

When a truckload of merchandise arrives, the warehouse manager will pay for it in cold, hard cash.

These people are the reason for those stereotypes of people hiding money in mattresses and taping reserves up in their basement rafters. They don’t have bank accounts. They’re off the grid.

And I’m like, That’s fucking cool.

We’ve gotten really used to credit in our society. It’s easy to buy things without the need for cash — which is probably why we buy so damn much that we don’t need. Even if you pay off your credit card in full each month so that there are no finance charges, I still guarantee you’re buying a ton of stupid shit that you would never buy if you had to hand over bills to get it.

Cash makes you think about each purchase. It shows you in real bills that you keep in your pocket just how much you have left. It makes you say things like, “Meh, I won’t get a latte because if I do, I won’t be able to pick up dinner on the way home.”

I don’t care how disciplined you think you are. It’s psychologically far easier to hand over a card than an equivalent amount of dollars. You don’t have to think about it. Have you seen the credit terminals where you don’t even have to swipe your card, and where you only have to tap your card against the thing? Have you noticed that purchases under $20 no longer require a signature? That’s to make buying faster and easier. No time or need to think.

It’s only a matter of time before a store will be able to scan your card without you having to take it out of your wallet. You’ll take what you want and walk out the door, and a sensor at the exit will recognize you and debit your account. Just like EZ-Pass sensors at turnpike toll booths.

Not me. Not anymore. I’ve started doing what I NEVER used to do. I’m now carrying cash and using it to pay for everything. I never used to carry even a dollar. Multiple times, I’ve had to fill out a form after driving on the turnpike because I forgot to bring toll money, and I have to have them bill me.

Now it’s cash. Cash and cash equivalents.

  • I’m paying for large purchases with checks.
  • I have recurring bills for website hosting, e-junkie, etc. that used to go on a credit card. I switched them to draw from the cash balance in my PayPal account.
  • Some of those companies don’t accept PayPal. So I got a PayPal debit card with that nifty Mastercard logo on it, and gave them that number. I’m paying for aWeber like this, and GoToMeeting. It’s not credit; that amount just comes out of my PayPal account once a month.

I’ve been doing this for a few weeks now. And you know what? It’s really damn cool. Each month, my credit card bill comes and there are no new charges on it. So I can actually pay down the balance I’ve accrued.

And there’s also two surprising, personal side bonuses.

  1. I feel very unique and awesome, because nobody does this. Nobody pays for things with cash. There’s a new, profound feeling of “I’m doing this right.”
  2. I feel rich.

Take a look at #2 again. I’m not rich. Not in any objective way. I’m doing well, but I’m still digging out of the real estate hole and repairing the collateral damage it caused. I have a negative net worth. It’s negative enough that I can’t bring myself to ballpark what it might be.

But shit, man. I feel like Donald Trump.

Nobody goes out to dinner and pays in cash anymore. Last weekend, our waitress didn’t even seem to know what to do with the bills I had put in the little folder thingy. I never used to carry even five dollars, and here I am pulling out fifty, in real bills.

And you get to say things like, “Keep the change.”

If you never carry cash, I want you to try something. Put your credit card away for a week. Go get two hundred dollars in cash. Throughout the week, pay for things with cash that you’d normally charge: meals, casual purchases, office supplies, whatever. And check out how it feels.

Two hundred bucks isn’t much today. It’s maybe one and a half times the size of our normal grocery bill. But try walking around with that much in dollars and notice how it feels.

You may feel rich, like I do.

You may feel nervous, like someone will take it. But why would you think that? Has anyone ever robbed you before? Are you advertising the fact that you’re walking around with bills?

Dude. Just try it. You may like it. You may ditch the cards altogether, as I’m in the process of doing. You may learn to hate credit and loans as much as I have.

You may decide to work on paying off your mortgage, no matter how loudly the investment guys yell at you that it’s a stupid thing to do, because if you’re like me, you may find the freedom that would come at the end of a fully paid-off mortgage intoxicating.

Think about it. No bills other than utilities and taxes. How much more relaxed would you be? How quickly could your savings pile up? How easy and cool would it be to buy even big purchases down the road (like your next car) with cash equivalents, right out of the checking account?

This is so awesome. Cash is king.

 

 

 

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Comments

20 Comments on Cash is king

  1. Darcy on Fri, 18th Dec 2009 9:19 am

    2. I am jumping up and down over hear about the paying off your house early thing (oh, and about your dad being in Philly, yay, Philly!). EVERYONE tells me not to do it because my investments are probably doing better and I can write off the mortgage interest and blah blah blah. But I *hate* having that mortgage payment hanging over me all the time. I just want it GONE. I overpay it every month, but it’s still THERE. I wish more people would say things like this. Thanks, man! I am going to go through the rest of my day giddy just thinking about it, I can tell.

  2. Bradley on Fri, 18th Dec 2009 10:08 am

    3. when my x left me in 2008. i started doing just this. i have no credit cards anymore. i pay with cash or debit card. either way, the cash has to be there to get whatever it is that i am buying. it feels great.

    admittedly, i use the debit card most of the time and rarely carry cash still. however, since i have been challenged…. i think i am swinging by the atm today and stashing the debit card at home.

    the mortgage however, is going to take a while yet. but i am getting there.

  3. Dave Doolin on Fri, 18th Dec 2009 10:36 am

    4. Man oh man oh man… I could go on and on about credit. About how I now wish I had done what everyone else did and enjoyed the last 20 years instead of being a chump, not buying a house, not buying consumer goods, not traveling, not doing anything that just about everybody else I know did.

    And here’s why: everybody’s getting bailed out on my tax dollars.

    I’m that person in the room who isn’t like everyone else. Who are all sharing wonderful memories. Which I don’t’ have. A decade slips away. Sure, I have savings, but the Fed is going to inflate that away.

    Since the US Gov declared banks “Too Big To Fail,” that’s what I want too. I want to be too big to fail.

    Here’s the deal: credit allows bluffing, or fronting for status. Mammals are nasty deceptive creatures, and when bluffing works, they’ll do it every time. Credit promotes a huge bluff: “I’m rich and you’re not. It’s obvious, every can see.”

    If you’re a company, why not borrow just enough to put the other guy out of business. That’s good business!

    Credit is as addictive as gambling, or crack. There’s good reasons we supposed to have controls on it.

    I could go on for pages. I’ll stop here.

  4. Pace Smith on Fri, 18th Dec 2009 11:32 am

    5. Yesterday I saw a billboard that advertised “guilt-free shopping.”

    P: “Kyeli? Why would someone feel guilty about shopping?”

    K: “Well, stereotypically the wife feels guilty about shopping because she spends the husband’s money.”

    P: “But so? If she has a certain amount to spend, and she spends it, why feel guilty? It’s not like she can spend more money than they have.”

    K: *raises eyebrow*

    P: *facepalm* Oh! Credit cards! I forgot about those.

  5. John on Fri, 18th Dec 2009 12:32 pm

    6. Johnny, best of luck! It sounds like you’re on the right track. We started our “total money makeover” a couple of months ago and I’m really happy with how it’s going so far. I did figure out what our “negative net worth” was and that pretty much made the decision for me. While we aren’t 100% cash, we do use it a lot more than we did. Merry Christmas!

  6. Mike Stankavich on Fri, 18th Dec 2009 1:10 pm

    7. Hey Johnny, way to go man. I’ve been on the same road for most of the year, and yeah, it’s definitely the best way. Credit has gotten completely out of hand in our society. My real estate shit already hit the fan in the early part of this year. The short sale is all done now, and I filed a Chapter 7 a couple months ago to dump the 2nd mortgage holder that wouldn’t let go of 90k of liability along with a bunch of credit cards. I also dumped my fancy SUV, took my last $2500, and bought an 8 year old minivan to haul around the family. It gets us where we need to go with no car payments and the insurance is lower too. We live on what we have, and it’s good.

    I’m not advocating bankruptcy for everybody, but I was looking at 150k of debt thanks to selling a property for 250k less than it would have two years ago. I didn’t want to spend the rest of my life paying those guys. I figure bank shenanigans is what killed the real estate market anyway, so sticking the losses back to them doesn’t seem inappropriate to me.

    @Pace too funny!

  7. Laura on Fri, 18th Dec 2009 3:24 pm

    8. I don’t carry a lot of cash, but I do operate 100% from debit cards. In a business like ours where income is unpredictable its just too easy to spend money thinking you’ll have it later. (Often not by being crazy but just honest miscalculation.) Debit cards are easy – do I have the cash right now or not.

  8. Fabian on Fri, 18th Dec 2009 5:20 pm

    9. Great stuff, Johnny. In Germany, people aren’t as CCC (credit card crazy) yet as people in the States, but it’s certainly becoming more and more popular. So I always use cash, and really like it exactly for the same reasons you mention. (Although I never feel rich. I just carry too little, I think. While being in San Salvador I always calculated a reasonable amount to take due to the sporty muggers over there. If you have too much, you’ll kick yourself in the ass for losing the cash – if you have too little, the muggers might get annoyed and hit you in the face. This happened to a friend of mine due to having a way too old cellphone while getting mugged over there… anyway, losing cash is way less trouble than losing a credit card…)

  9. Johnny on Fri, 18th Dec 2009 6:11 pm

    10. I think it’s mostly about the philosophy. It’s like Laura says, using a debit card… however you do it, you buy with FUNDS YOU HAVE. Nothing is to be paid later. And man, is that an easy trap to fall into.

    Real estate issues forced my hand, but I think I still would have been suckered by the lawnmower thing.

  10. Larry on Fri, 18th Dec 2009 7:50 pm

    11. Hey Johnny,

    Cash is king, there is no doubt. My wife and I took over two years to dig out of $50,000 of worthless shitty debt. Its a terrible thing to finance a pizza or hamburger, but people do it every day…

    Good luck and stay focused, we used Dave Ramsey to get out, but whatever method works for you is the one to use…

  11. Anne on Thu, 24th Dec 2009 1:56 am

    12. I have a lot of work to do still on the getting out of debt thing (working on it though – especially with our business). But one thing I refuse to do is make car payments on a car for personal use, and yeh it was amazingly cool when I bought a gorgeous (used) Acura 3.2TL two years ago for cash (they knocked the price down $1000 as soon as they heard I was paying cash!)

    Recently, my daughter hit a deer in that car. The insurance co. wanted to total it and was offering us squat. I fought and fought – we are working now on getting them to work with the body shop to fix the car (I love that car!)

    Anyway, when you get around to buying your next car with cash you’ll know what I mean!

    Anne @alivenkickin

  12. Johnny on Thu, 24th Dec 2009 8:16 am

    13. Bought our current cars cash… I know what you mean!

  13. Bethany on Mon, 28th Dec 2009 5:14 pm

    14. Cash only is a great way to operate and is less stressful. Not having had a car payment in over 10 years and paying cash for my last two vehicles is great. This way of life actually allows you more financial freedom than if you were bogged down with interest rates. I highly recommend it! Cash is king.

  14. ZABETON 2.0 on Wed, 6th Jan 2010 8:27 pm

    15. Money is king, yes! But no when it comes from hiperinflation. Like the situation that you show in the picture. jejejeej…In that country (Africa) a cup of cofee may be 20,000.

  15. Lawrence from Office Space’s guide to freedom | Project Mojave Blog on Tue, 19th Jan 2010 2:54 pm

    16. [...] the one who taught me to have faith. He’s the one who gave me the idea to operate on an all-cash basis. And he’s the one who gave me a really obvious — yet really underrated and often-missed [...]

  16. wtrauth on Wed, 20th Jan 2010 12:29 pm

    17. Total agreement. I haven’t used credit for over ten years. Cash basis only. I buy and sell short sale Real estate and hear horror stories daily of people who are going broke trying to save their credit by continuing to pay for a house that is worth half of what they owe on it. They are terrified of losing their credit. So terrified that they will go cash broke trying to maintain their credit. What do you thinkg will happen to their credit when they run out of cash? Then they will have neither. The smartest, bravest people I know are doing “strtaegic defults” on their upside down real estate. Credit rises the price of everyting you buy. And then you get to pay the interest.

  17. wtrauth on Wed, 20th Jan 2010 12:32 pm

    18. Please forgive the typos above. I was hurrying.

  18. Johnny on Wed, 20th Jan 2010 2:44 pm

    19. Holy crap can I relate to that. Browse this site a bit and you’ll see my real estate horror stories… short version is a bunch of investments before the market crashed.

    So what I eventually realized was, “What am I holding onto?” And so let’s just say that I’ve done some strategic defaulting.

    Like you said, I’d rather have some cash in the long term rather than spend even one more day in panic, worrying about salvaging credit that frankly, I no longer even need.

  19. Patrick Prothe on Mon, 1st Feb 2010 12:55 am

    20. So you hit the nail on the head with this one. I’m right there with you on those “incredible” real estate investments. Anyone want a fabulous view lot on the Washington Coast? How about a Condo in Bend, Oregon? I’ve go both! Woo hoo!

    At the time, I actually thought this would be part of a great retirement plan. Uh huh. And I used to think boats were a black hole.

    Cash is so king because it provides you options. It provides you room to navigate in business and say no once in awhile. You call the shots rather than the big banks.

    Good luck. It’s nice to know I’m not alone out there. I as well look forward to being rid of credit and operating solely on cash!

  20. Johnny on Tue, 2nd Feb 2010 5:43 am

    21. Exactly. I’m now almost 100% cash for 2 months or so and it kicks ass! You’re absolutely not alone.

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