Here’s a question for you, ladies. You’re out on a first date at a restaurant with someone new. You’re interested . . . not sure, but interested. It’s just a date . . . let’s see how the evening goes, you think to yourself. When it comes time to pay the check, he:
If it is #3, dump him right then and there and block his phone number.
But between #1 and #2, which impresses you the most?
Way back when I was a young man people paid cash for most everything. In fact, it was a mark of pride to do so. Credit was for people who couldn’t afford to pay cash – losers, in other words. But now! After working with many clients on cash flow organization, I can tell you that most people simply use a card to purchase everything, and most millennials don’t even carry cash.
If you don’t know where your money goes, using plastic isn’t going to help you find out. Yes, you could take your statements at the end of the month and categorize things. But that may not be accurate. Say your statement shows charges to Publix of $600 for the month. You can’t see much of that was actual food, and how much was for the pets, and how much was for gifts (flowers, wine).
When you’re using plastic, how do you know when you’ve used up your budget in any given category (assuming you have a budget)? You don’t really; you can keep creating transactions until there’s nothing left to debit or the line of credit is used up. You have no guardrails on spending, in other words.
If you’re trying to get your spending under control, I have a concrete do-today suggestion to help. Here it is:
My mother used the envelope system. She had a series of budget envelops, labeled by category: food, clothing, etc. Dad deposited his check and took out enough cash to fund the envelopes for that month. So if mother went over in clothing, it had to come out of another envelope – entertainment, for example. The point is that there were self-imposed limits on spending, and they lived within their means, allowing for savings.
How quaint that sounds today! We implement essentially the same thing with our clients, except on an Excel spreadsheet. If your yearly budget for travel is $3000, you have $250/month allocated. If you don’t use this month’s allocation, you roll it forward, so next month you have $500 available for travel. When there’s enough accumulated, you can buy the tickets.
This is the best suggestion I can give anyone for finding out where the money goes. I have another suggestion I’ve saved for Part Two, so be sure to read on.
And ladies – I leave my initial question open. Does flashing a wad of cash mean he’s trying too hard to impress you? Or does it mean he has good financial controls in place? Does using the gold card mean he really can’t afford the meal? Or does it mean he’s accumulating airline miles and pays the bill off when it comes? Hmmm. Maybe you’ll have to ask him.