How to convert to cash only and changing habits?

[momofmany]

Ok, it probably seems like a really stupid question, but for those that say for instance waited a little while to file or something like that, how did you change over to using cash only? Did you get a paper check from your work and then just cash it? Is there somewhere that explains how the cash system works? It's probably obvious how to do it, but pretend I'm not so intelligent!!

Also, how did you change your spending habits? Like overextending yourself/paycheck? I'm guessing if you go cash only obviousely when the cash is gone you can't spend anymore. But did you start budgeting and just make yourself follow through or what?? Where do I start? We probably won't be filing until April. And as we had lived off our credit cards so long, I don't know what our real monthly expenses are, and so I need to start figuring that out.

Thanks for the help.
Stressed in paradise, Sara

[BKTango]

"Cash Only" just refers to anything non-credit. For example, you of course get your paycheck, place it in your bank or cash it. Whether you write checks, use literally cash only, or use a direct debit card from your account, you are living cash only. Simply put...you are living off what you make and not credit cards. Budget is key. Sit down list your priorty bills, and priorty expenses (food, gas, etc.) anything you have left over after you pay for those expenses is fair game. You could use the excess for savings, expenses and "wants", stocking up on food, or just plain old having a good time. As long as you can pay for all of your necessary monthly expenses you should be fine. It's wise though to allow yourself to build up an emergancy fund for those "just incase" times. the first step, is too look and see exactly where your money goes and what you can cut down or out. Gotta learn to live within your means and pay for your family needs every month and then go from there. It's a pretty damn good feeling to know you have the money to pay for everything and you owe noone.

[CindyLou]

The important part of cash only is having an emergency fund. That is the hardest part, in my opinion because you do not have that safety net of that credit card for emergencies when you are in that BK process.

[SinkingFast]

We quit using any Credit of any sort.

We switched over from Direct Deposit to getting a pay check. A bit of a hassle, but when you get closer to filing time, it helps you control your cash flow better.

We basically quit using checks unless we absolutely had to the closer we got to filing. Checks take time to clear. Even if the company or person cashes them right away. We had a Landlord that would sit on our rent check for weeks, even a month or more. You can't have a $1000 rent check outstanding on the day you file and no Exemption to cover it. That money would belong to the Trustee.

We leaned heavily on our Debit Card for purchases of groceries, gasoline, prescriptions, and such. Purchased Money Orders to pay bills like utilities, trash, phone, etc. Got a Cashier's Check from the Bank to pay rent. That way, each purchase, the money was automatically gone from the bank acct. No waiting for checks to clear.

Some people would advocate cashing your check and paying cash for everything, but the Court likes to see records and consistency. Your bank statements will show a flow of money into and out of your bank acct every month.

You really need to establish a budget and live with it. Be frugal. No lattes. No lottery tickets just for fun. A dollar here, $4 there starts to add up over time. And many of us are here because we didn't budget well before our "crisis" event hit.

Cindy makes a good point. Setting aside funds for emergencies and those 1x or 2x a year bills, like auto insurance is tough.

It's gonna sound childish, but many folks lean on the envelope system to budget for expenses for a while. If you figure you need $140/mo set aside for auto insurance then you put $140/mo in your auto insurance envelope every month.

[Bandit]

Ok, it probably seems like a really stupid question, but for those that say for instance waited a little while to file or something like that, how did you change over to using cash only? Did you get a paper check from your work and then just cash it? Is there somewhere that explains how the cash system works? It's probably obvious how to do it, but pretend I'm not so intelligent!!

Also, how did you change your spending habits? Like overextending yourself/paycheck? I'm guessing if you go cash only obviousely when the cash is gone you can't spend anymore. But did you start budgeting and just make yourself follow through or what?? Where do I start? We probably won't be filing until April. And as we had lived off our credit cards so long, I don't know what our real monthly expenses are, and so I need to start figuring that out.

Thanks for the help.
Stressed in paradise, Sara

I did this just backwards. When I first came out of the hospital I was spending the little cash I had on specific drinks that I had to eat and on perscriptons. I had no paycheck for a month. When I did get a check it was for about $200 so I begged my boss for my vacation pay early.

Then it caught up to me when I had no choice but to use my plastic to buy food and the other perscriptions and even now looking at charging one utility.
For the first month I kept telling myelf, CASH ONLY. Then it ran out faster than I thought it would. Now, the only way I will ever see cash only again is by seeing an attorney.

The part you mentioned about figuring out monthly expenses I have always known that. I guess I was living in a fairy tale thinking I could pay back all these medical bills on my own. At this point I am very thankful for so many things especially the chance to get back on my feet in a country that believes that if a man cannot pay back his bills in/after seven years, he should be forgiven. That is a real blessing that no one will ever know until thay have no other choice but to ask for it.
It is not a stupid question at all.

[Lindsay]

One of the things that caused me to realize that we were bankrupt was when I decided that we had too much debt and would start paying cash for everything and not using the cards. It was impossible. We had been using credit for so long that I didn't even know what our expenses were. When I went to the grocery store, I'd just buy what we needed and charge it. After a few months of paying cash for everything plus trying to pay credit card minimums, we had tapped what was left of our home equity (using it to make car payments and some credit card minimums) and I realized that we were bankrupt.

We've stopped paying our credit cards now and I'm trying to get a grip on our finances. My first goal is to try to save enough for the lawyer and bankruptcy. Our expenses are way out of control so I've been listening to Dave Ramsey everyday and reading books on frugal living. Our grocery bill is way out of control and I hate to cook. We don't have central air or trees on the property for shade so if I use the stove or oven, the inside of the house becomes intolerably hot. So in the summer, we get alot of take out or tv dinners for the microwave. We bought a cheap grill and I'm trying to work through this. It doesn't help that I have three teenagers (2 boys and 1 girl) at home who eat like there is no tomorrow.

I'm scared about not having the credit cards for a safety net. But because of the credit cards I think I've been living in a fantasy world for ten years with no idea how much everything cost. I didn't even know how much we owed until recently. I thought it was around $45,000; it turned out to be $80,000! At 30% interest.

But I see alot of people on the boards who are managing. I went to the grocery store tonight and paid cash for my groceries. It was the first time I've paid cash for groceries in years and it felt odd, but kind of good. My average weekly grocery bill is about $250.00 according to my credit card records so I need to do some severe trimming in our house in that department. I'm planning on stocking up with sales and using coupons to try to cut the bill in half.

[JRScott]

Have you ever heard of Dave Ramsey?

He has a couple of books I would recommend Financial Peace and Total Money Makeover. I wish I had heard of him 4 or 5 years ago when I might could have pulled myself out without a bankruptcy.

If your company has the option for a paper check I'd start getting those. Take them to your companies bank and cash them.

Pay food, housing, utilities, transportation first before anything else.

If you need to mail payments to your utilities or a car or rent payment then you can get money orders using cash at Wal Mart. They are about the cheapest place around for money orders. Keep the receipts.

Plan for the future by building an emergency fund as well. Bumps in the road are inevitable and we need to be prepared for them. (Don't build this to high while you are in debt as they might garnish it or the trustee take it in a bankruptcy, probably the goal pre bankruptcy might be only 500 dollars or less, then have separate savings to pay the lawyer, after discharge you will eventually want a 3-6 month worth of funds)

You are going to need a budget. Dave has a system called the envelope system. Basically you write a budget before the new month starts. You go and cash your check. Then you put the budgeted amount into the envelopes. You'd have one for food, gas, electric, rent, etc. You'd then pay for the stuff relating to the envelope name with the money in that envelope. You run out of money you stop buying stuff in that category (unless you can shift money from another envelope yet still meet its obligation.).

I use a gas/food envelopes myself. I figure 35 dollars for each each week. (It is not always that much and sometimes I dip into gas for more food or dip into food for more gas.). I am single though so I can get by with a lower food budget.

One thing in cutting costs is to stop eating out. Its convenient I'll admit, nice not to have to do the dishes but it is generally more expensive than if you just ate at home.

[keepmine]

It's good to be thinking of life post bk. Far too many people think that bk will solve the problem.
While budgeting is an impoerant part of the process, by far the best thing you can do is take steps to raise your income. You just have to get better jobs or pt jobs. Just inflation alone means that budget will always need to be adjusted higher.

[Cassiopeia]

Have you ever heard of Dave Ramsey?

He has a couple of books I would recommend Financial Peace and Total Money Makeover. I wish I had heard of him 4 or 5 years ago when I might could have pulled myself out without a bankruptcy.

I've seen Dave Ramsey mentioned a few times on here. I googled him and went to his site. He does have some good advice (and I did order Financial Peace from my library); HOWEVER, he has some pretty bad opinions of bankruptcy...i.e., it will "RUIN" your life forever, etc. etc. Well of course he wants to sell books and help people avoid bankruptcy if possible.....I can understand that. BUT I don't appreciate his perpetuating the myth that filing bankruptcy is the end of the world. For most who go that route, there was NO choice in the matter. And, as evidenced by posters here, there IS life after bankruptcy......a fresh start. And most who have gone through it are ecstatic they filed. I know I am. And I don't like hearing my life is now "ruined."

[JRScott]

I've seen Dave Ramsey mentioned a few times on here. I googled him and went to his site. He does have some good advice (and I did order Financial Peace from my library); HOWEVER, he has some pretty bad opinions of bankruptcy...i.e., it will "RUIN" your life forever, etc. etc. Well of course he wants to sell books and help people avoid bankruptcy if possible.....I can understand that. BUT I don't appreciate his perpetuating the myth that filing bankruptcy is the end of the world. For most who go that route, there was NO choice in the matter. And, as evidenced by posters here, there IS life after bankruptcy......a fresh start. And most who have gone through it are ecstatic they filed. I know I am. And I don't like hearing my life is now "ruined."

Yes Dave doesn't like bankruptcy. However he does have some good tools for budgeting.

I think Dave's main point is that most people, especially chapter 7 filers, don't necessarily make the life changes needed to avoid future bankruptcies without changing their lifestyles. His idea is much like a 100% Chapter 13 in which you make the choice to pay back the debt, all of it. In doing so you learn how to budget.

I realize that Dave is incorrect on some points. Bankruptcy does not ruin you for life, there was a time it carried a heavy stigma but that largely disappeared in the 90s. You can get your life back on track.

Also Dave's plan to pay off debt usually requires you to get more jobs or better paying jobs and to sell stuff. I filed bankruptcy because I don't have anything to sell, and due to two back injuries I cannot take on more work without risking my overall ability to work. (Its pretty hard to work more than 40 hours a week for me.). I work in an economically depressed area to and with only a high school education I can't really find better paying work due to my back . (I am hoping to have enough to go back to college next year in the fall, I'll be 38 then)

I mostly was trying to point the OP to Dave's books for budgeting. He has some good budget plans.

I realize that not everyone can avoid bankruptcy, and most people I've seen by the time they get here I don't think Dave's plan would work for, I know it wouldn't work for me as I owed to much relative to my ability to earn.

[Cassiopeia]

Well said, JRScott. You put it all in perspective, and I do agree that his methods wouldn't work for those in the most dire circumstances who have no alternative BUT to file bankruptcy.

And also as you say, he does have some great ideas about budgeting and financial planning. I am looking forward to reading his book. My bankruptcy is behind me (well, almost...just waiting for discharge), and I'm ready for my "fresh start."

[Lindsay]

Cass, Dave Ramsey filed bankruptcy himself about 20 years ago according to the book. I think he tries to get people to avoid bankruptcy because basically that means you have no more hope about getting out of the situation and he's all about hope. Also, like JR said, bankruptcy used to have a bigger stigma than it does now so it was probably more traumatizing for Dave Ramsey when he filed. You can listen to his show live online 2-5pm eastern time weekdays. I think he sells a course now to fulfill the debt management class you have to take during a bankruptcy.

We have a family friend who filed bankruptcy, discharged in 2004. He is 74 years old now and I can assure you that the bankruptcy has not really hurt him in any way. From what he told us, his wife had run up a huge credit card debt that he was joint on ($60,000+) and then passed away. He took out a home equity loan and did everything he could to pay it off, but the interest rates were killing him and he had to file. At the time, we were already deep in debt but I wanted to do the right thing and refused to file. I've faithfully paid the payments since and we're broke from trying to solve the problems on our own when we should have looked into bankruptcy earlier.

He's got a wallet full of credit cards now, at low rates and with high limits ($10,000). He let me look at his bankruptcy papers recently so I could see what they look like and to my suprise, he had included in bankruptcy three Discover card accounts. A year after he filed, he was given a new Discover platinum card with a low interest rate. It certainly wasn't the end of the world for him and I'm kind of miffed that three years later, his credit is good now and I've got collectors calling me night and day and broke from trying to avoid BK. I've found that misguided hope can be a dangerous thing.

Even though I haven't filed yet, I enjoy Dave Ramsey because I think his advice will help me after I filed. We will have to go ahead with the BK for sure (unless I win the lottery soon and I don't even play), but I hope to avoid credit cards in the future and make some lifestyle changes.

[SinkingFast]

As several others have commented,.......... The transition to Cash Only is hard.

Like others commented, we didn't know how much we were spending on food, gasoline, and other routine living expenses. Go grocery shopping, grab what we needed, and swipe a CC to pay. Buy gas for the car, swipe a CC to pay.

It is true that you will go thru a period of adjustment. It's hard to pay cash and live within what you've got in the bank or on hand. I can't tell you the number of times we'd be down to our last $50-$100 and 8 or 10 days to go to pay day.

It's tough at the start, but it does get easier with time.

[Lindsay]

SinkingFast, for me that has been the most enlightening thing so far about our impending bankruptcy. Alot of utility companies like cable, internet, phone, and heating take credit cards. We paid alot of these bills with automatic credit card payments. We paid our auto insurance with credit each month. Also, since I sell on eBay, the fees went on the credit card. I was confused on how the card balances became so high, but now I see that I had my head in the sand and wasn't being mindful of expenses. I would buy things with cash too, but most of the expenses were charged. Now I'm going over the budget and I'm trying to figure things out.

I had $475 in cash yesterday plus $600 in the bank (but I'm saving the checking account money for the lawyer bill) to last the week and spent $120 yesterday at the grocery store, leaving $355 left. I've got a disconnection notice due on the electric ($195) to pay in the next week. Thankfully, the mortgage is already paid for the month and not due again until Sept 10. It's really forces you to plan, but its scary. I think the key is probably to have money set aside for an emergency fund and that will be the next step, once I save enough to pay the lawyer who will be around $2000. Another thing that I haven't done, but am working on now is planning the grocery menu for the month and being more mindful of utility expenses. I am going to try to reduce our bills.

My birthday is coming up and my parents and grandmother give me about $500 in cash so I will hopefully use that for my emergency fund startup.

[whatamess]

I like Dave Ramsey too, but like another said I had nothing worth anything to sell. I take care of two young children and watch over my 73 year old mother. I also delivered newspapers when we had two cars. Second car caught on fire....that was done. We couldnt afford another. I also hurt my back in an auto wreck. Thats that..sometimes you have no choice. My husband was and is working as much overtime as he can, and that was cut back due to overtime laws.

I have been using the envelope system. What I did was buy a coupon organizer, labeled by month then put the bills in and notes each month of whats due. I then divide then money accordingly. Dont forget entertainment and savings. Daves site has free printable budgeting sheets to help you out. Ive used them to set up the budget and they are really good.
I was a total budgeting fool and Ive managed!! There hope even for idiots like myself!!
WAM