Most of my more recent friends think of me as being good with money. To an extent, their perception is accurate. I love talking about total return, asset allocation and risk tolerance. I would happily debate the merits of holding stocks in a portfolio past retirement age, or the importance of guarding against inflation risk.
These are concepts related to investing. Cash management, however, is an entirely different animal.
From the time I was little, my relationship with cash has leaned toward the dysfunctional. I have experimented with multiple bank accounts at different institutions, paying myself for services I have decided to forgo, and putting money in a swear jar. I have gone to ridiculous lengths to keep from raiding the proverbial cookie jar, including bank accounts in far away cities with no access points whatsoever and complicated electronic “envelope systems” that ultimately and inexplicably led to overdraft fees in multiple accounts at the same time.
Some time after I joined the “real” world, cash and I reached an understanding. I no longer need go to ridiculous lengths to keep my family solvent. But even now, careful scrutiny of my comparatively streamlined approach to cash management will betray signs of its tumultuous beginnings.
Here are some of the tricks I have used to save for a goal, keep my spending under control, and keep things interesting. Because let’s face it, managing cash can be BORING.
The Coffee Game. Ever have a habit that needs a hard look, but is too dear to you to bear scrutiny? Mine was fancy coffee. $4 worth of it, nearly every day. So I started saving my coffee money and brewing the coffee at home, just to see how fast it would grow. I used a jar because I wanted to literally watch it grow, but these days online banking makes it easy to do it in a bank account. But I like the cash – it makes it more fun. (The result of my diligence was a taste for only black coffee, which has saved me lots of money over the years.)
Save the Fives. This is another one that helped me make good decisions about my smaller spending decisions. There was never a time in my life where spending $5 would cause me to lose sleep, yet saving my fives was enormously satisfying. I’ve used this one to save for things that I didn’t think I could afford at the time, and it taught me to be mindful of how small changes can have a big effect on my financial situation.
Turn on the autopilot. When online banking became a thing, I was sure it was a gift from heaven, just for me. I started adding up my fixed expenses (rent, car payment, insurance, etc.) and redirecting them to a separate account (the one in a different city with no access point, actually.) I also included just a little bit extra each month, just to be safe, set up all my bills on autopay, and pretty much put the whole thing out of my mind. Lo and behold, when I checked back several months later, there was a surprising amount of money in the account – more, in fact, than I had ever had at one time. It was that feeling that helped the lesson sink in. In order to build wealth, I had to find a way to foil my own worst self.
Obvious, yet elusive
I am perfectly aware that not one of these scenarios netted a result I couldn’t have foreseen with some pretty basic calculator work. But that’s not the point. As you may be aware, it’s a theme of mine that people rarely behave rationally, and I am a spectacular example. There is absolutely no reason to be ashamed or embarrassed because you find the basics of managing cash to be elusive. Saving money is difficult for many of us, and admitting that you may need to do something unconventional to accomplish what is simple in concept is the first step to building wealth.
Of course, from a strictly financial standpoint, not one of these strategies makes sense. Don’t let that stop you. Remember that sometimes the best tool for managing cash is the one that works for you.