This Family Paid Cash For Their Car; You Can Too!

by Joe Plemon on July 21, 2010

My friends John and Lisa recently shared some exciting news with me: for the very first time in their lives they paid cash for a car – a sweet 2 year old Toyota Prius with only 29,000 miles on it. They saved up the $17,000 purchase price (new price was $31,000), did some shopping and drove off in a vehicle that will last them for years and will never require a single payment. As we talked, I learned that this family has been doing all the things I like to write about: they have zero debt and a paid for house.

Naturally, I assumed you would want to know more of their story, so I asked if they would agree to an interview. Good sports that they are, they agreed. Thank you John and Lisa! Here is their story:

When did you get serious about getting your finances under control?

Our finances have never really been out of control, but after listening to the Financial Peace seminar it became obvious we needed to get out of debt.   We found paying interest for “stuff” to financial institutions was making us have to work harder and enjoy our family less.

How did the car purchase itself go?

Quickly. haha The oddest part was writing a check out of our personal account and driving away with only a receipt.

Did you struggle with the decision to pay cash?

Not at all.

How do you feel about it now?

Great and in control.

How have your lives changed since you decided to get rid of your debt?

We feel more secure and stable. We know that no matter what happens, we will have our basic necessities protected. It makes not following the Jones’ much easier. We are no longer enslaved by the atmosphere of consumerism.

How much debt have you paid off in the past few years?

We have paid off $130K (including the home) since starting. We also have paid cash for all needs since deciding to not take on debt. It has been 3 or 4 years.

What has been the most difficult part of this journey?

Weekly budgeting and controlling daily spending. We still haven’t mastered this yet.

Have the two of you been on the same page throughout the process?

Yes, both of our families discouraged borrowing. So we were raised with the same similar mindset toward family finances.

How have you differed?

Not much. We have had to redirect each other at times, but it wasn’t a struggle.

What has been the key in working together?

Having the same goal and desired outcome. We want to play with our kids more. We work so we can live, not live so we can work.

I know you have one daughter who has graduated from college and two preteen daughters at home. How has this focus on your finances affected them?

We are fortunate to have healthy incomes, so the burden has not been too great for them. But they are getting an education along the way. They are also not kids that place a lot of value on “stuff”.

Do you think your journey has been a good influence on them?

Absolutely and for Kathe too. She had to struggle through college and manage her finances well. She did not take on school loans or credit card debt for her bachelors degree. She worked throughout college and finished in 4 years. She drove the same car she had in high school. She lived on campus and worked campus jobs. She aggressively pursued opportunities for stipends, grants or other positive financial assistance programs.

What is your biggest financial challenge going forward?

Staying comfortable in the stock market with investment strategies. Lost $7200 over the last 3 months in my 401k. Wisest investment for us to date has been property.

Do you believe you will stay debt free for the rest of your lives?

ABSOLUTELY!! We are even looking to downsize our housing to a more modest and realistic size.

Anything else you would like to add?

We think the work you are doing is very helpful for people and we are thankful for our experience with you.

Concluding thoughts

You have just read a real life story of a family who is debt free (having paid off $130,000 in debt) and committed to staying that way. John and Lisa are passing this legacy on to their children; their daughter worked and sacrificed to make it through college with no credit card or student loan debt. My hunch is that their two younger daughters will do the same.  My congratulations to John and Lisa: you are doing it right!

How about you?  Do you pay cash for your cars? Are you debt free?  Are you working toward becoming debt free?  How are you progressing?

Creative Commons License photo credit: quaziefoto

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{ 12 comments… read them below or add one }

Money Beagle July 21, 2010 at 6:41 am

That’s awesome! I love that they included their home in their debt payment plan. So many people seem to focus on the debt and just say ‘ah, there’s also the mortgage’ and just push that out of their minds. The fact is that, for most, the mortgage payment is the biggest debt payment they make on a regular basis. To unburden yourself from that and know that you own your home outright has got to be an awesome feeling! I commend your friends for this!!!

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jeff @ sustainable life blog July 21, 2010 at 7:21 am

This is a great story. Hearing about people who are debt free makes me want to join the club even more. Unfortunately I’m not debt free yet, but I’m workin on it.
Beagle has a great. Point so many people just ignore the mortgage but It’s like forgetting you earn 30% more

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joeplemon July 21, 2010 at 7:26 am

Money Beagle,
How true. I wouldn’t focus on paying off my house until I had all other debt paid off and a good emergency fund, but your point is well taken: most people don’t even think having a paid for house is a possibility. John and Lisa show us that it is.

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joeplemon July 21, 2010 at 7:44 am

jeff,
You said three great things in your comment:
1. You want to join the debt free club even more.
2. You’re not debt free yet. (emphasis on the “yet”)
3. You’re working on it.

You will definitely be in “the club”…probably sooner than you think.

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Darren July 21, 2010 at 10:57 am

Great interview. Short, sweet, and to the point!

As far as the dip in their 401k, I don’t know how old they are or how close they are to wanting to retire. But if it’s at least 10 years away, they shouldn’t have to worry about this too much.

Buying a quality used car with cash is The Millionaire Next Door way! I plan on doing that in the future as well.

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Financial bondage July 22, 2010 at 9:05 am

My next car will be cash but $17K is way more than I can spend or would want too.

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joeplemon July 22, 2010 at 9:41 am

Arthur,

Me too. My current car cost $7200 when I bought it three years ago (with cash). It is a great car and I hope to be driving it for many more years.

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Khaleef @ KNS Financial July 22, 2010 at 3:43 pm

Great story! Some people get trapped into thinking that a car payment is just a part of life. It was also very encouraging to see how they paid off all debt and are looking to downsize their home! Definitely shows that it can be done with discipline!

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joeplemon July 22, 2010 at 4:35 pm

Khaleef,
That is why I wanted to post this story…to show people that it can be done. And, as you pointed out, this family is planning to downsize their paid for house just to better optimize their overall finances.

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Lisa B July 23, 2010 at 7:44 pm

Hey. You are right, 17K is too much for a car. Our situation is a little different than most. I put approximately 30K miles/yr on my car and have to commute 100 miles each day I work. I am so afraid of breaking down on my way to work that it was worth more money for the safety.

Also, we are getting 47 miles/gal, so part of the trade off is about a $1500/yr savings on gas. The other part of the story is our other two cars are paid for and have 156K miles (2005 Honda) and 250K (2000 Honda). Their reliability is getting risky and with our busy lifestyle we barely slow down in our driveway. Haha Good luck to everyone…it can be done!!!

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joeplemon July 23, 2010 at 9:25 pm

Lisa,
Thanks for sharing your story with our readers and for explaining the rationale for the $17K purchase. It CAN be done…you and John did it!

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Joe Plemon August 12, 2010 at 3:18 pm

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