NL- If one of your New Year’s Resolutions is going to be handling your money better, you need to pay attention. Nunzio is going to write an on-going column about finances. Feel free to ask him questions in comments and he’ll answer them.
by Nunzio Bruno
There’s something that is instantly gratifying about being paid in cash – something kind of primal about it. Even as a consultant I get excited when someone extends the offer. It’s quick, clean, and final. You know that you’ve finished the job you were hired to do and you can move on to the next one. No worries about making phone calls, waiting on the mail, or dealing with people’s excuses. Now, if you’re reading this odds are you know exactly what I’m talking about and today on top of introducing myself I want to share,in a series of posts, concrete tips to help you manage your cash flows. I’ve had quite a bit of experience in coaching people in cash heavy businesses and can’t wait to share some of those lessons with all of you. My first question has to do with what you are doing with the cash you have already?
Is it taped to the back of the toilet, in a sock drawer, or stashed in shoebox somewhere? Better yet is it non-existent because, like me sometimes, you succumb to your impulse shopping urges. (Hey even financial coaches get weak from time to time) If any of those describe you then someone should slap you on the hand, in a firm voice say “NO!”. First thing you need to do is remove the temptation to spend and increase the safety of your savings. Now I know most of you who have hidden stashes will argue that it’s in a really good secret hiding spot. Even still, in the event of a flood, fire, natural disaster, curious house pet, or really good house party you might be exposing yourself to unnecessary risk. Find your favorite banking institution, one you are comfortable with, and deposit! If you already have an account somewhere let’s start to use it. When you physically separate yourself or add an extra step in accessing your funds it’s been proven to help your saving efforts.
Not convinced lets talk about the pros and cons of holding cash.
Pros:
• Easy to keep track or account for spending. You only have as much as you physically can count.
• Feelings of safety. It’s in a hidden place that you have access too 24/7.
• Spending and saving under the radar of financial institutions and the IRS. Where there’s no paper trail there’s no evidence.
• In the adult entertainment business you might be inclined to under report earnings to lessen the blow from the IRS every April. That’s a very real pro that needs to be mentioned. (Not endorsing it just saying I can understand why it happens)
• No fees for handling.
• Can’t inadvertently overspend because once you are out of cash, you’re out of cash.
• If you have debt that gets a little out of control. Institutions don’t have access to your sock drawer.
Cons:
• You become a target for thieves carrying around exuberant amounts of cash.
• How safe is your is your sock drawer or hiding spot from break-ins, fires, or even people that you thought were close to you.
• Similarly if you lose that wallet or purse there’s no way to recoup that loss. As opposed to correcting fraudulent charges via debit card.
• Costs – How much is it costing you to cash your checks when you get them. How are you paying your bills if not electronically then it takes time and postal costs.
• Not earning interest – at all. Ok, I know this one isn’t a huge loss because your everyday basic savings account return is negligible but it’s still pennies that you didn’t have before
Bank Pros:
• Banks and financial professionals are everywhere. The opportunity for consuming information that will help improve your financial situation is a huge advantage. Unless you have someone in your sock drawer willing to help you out.
• Safety. Not just the FDIC insuring deposits but your funds are co-mingled so there’s not really any worries of fires or flood wiping out your life’s savings.
• Ease of track-ability and use. Whether you’re buying coffee or paying your car insurance using your debit card saves you time and money.
• Earned interest. Again even pennies were pennies you didn’t have before.
• Some physical businesses and anything having to do with e-commerce will not take cash so the only way to consume is electronically.
• If I can’t see it, I won’t spend it. The extra motions to going to withdraw funds from ATM’s creates inadvertent opportunities savings.
• Availability to credit or the chance to qualify for credit.
◦ Mortgages, car loans, etc.
Bank Cons:
• There costs associated with bank accounts. Monthly maintenance fees, overdraft costs, and sometimes too many transactions can incur costs.
• Hours are limited for support and services.
• Support calls can be overly complex and frustrating.
• Daily withdraw/spending limits.
• Accounts can be subject to collections.
• Time before funds available between deposit and need for spending.
• Constantly being "sold to" at every bank interaction.
I know there was nothing revolutionary here but I hope that I at least got you to thinking about your own situations. I’m not saying that everyone should be going from one extreme to another but what I am saying is that there should at least be some kind of balance. Hopefully you guys will get to see me again and I’ll get to help you tackle all kinds of money/financial/business related issues that have to do with being in this industry.
Nunzio Bruno, MSFP is the owner of Financially Digital a business consulting firm as well as producing http://www.financiallydigital.com. FinanciallyDigital.com is a resource offering information on relevant financial issues, personal finance, the latest in tech and social media. The goal is to make people better consumers of goods, services, and information in real life and on the web.
RE Banks: They can limit the amount of your money you can take out at one time. With the economy the way it is the chance of an economic collapse of our country is a very real possibility or at the very least some banks do fail and getting your money out of them will be difficult at best.
Karmafan – You are absolutely correct on the daily limits with some banks. That’s more of a safety feature than anything else and usually only limited to ATM transactions. If you did need a larger sum of money for something most banks are happy to oblige. As far as a collapse of financial institutions circa the runs on savings and loans in the 1980’s – I think we will be just fine. Yes banks do get into trouble sometimes and yes there have been those that have closed their doors. Depositors though are always safe, thats what the FDIC is for and most of the time bigger banks with higher liquidities and deeper staying power pick up the smaller ones and business just continues as usual 🙂 Thanks for the comments though!! Keep them coming!
Isn’t our National Debt close to our total worth as a country? I believe we have loans that add up to least 13.9 trillion and something like 97% of our country’s total worth (I think thats what I remember reading). Most of it we borrowed from the chinese. What will happen when we reach 100%?
To me thats awful damn scary and if the chinese ever called in our loans we would be a bankrupt country. So putting all your hard earned money into banks does not sound to me like the best choice right now.
KarmaFan, all of those are what most refer to as “play numbers” because if the US ever defaults, the rest of the world is going down the tubes with us. US Treasury notes have no physical assets tied to them, they can’t be “called” at a moment’s notice, and contrary to what you are told, the Chinese do not own all of them. In poor economic times, holding cash gives one access to all sorts of potential deals but financial assets are going to be shaky for some time to come.
One of the pluses of being an independent contractor in the sex industry is that you never go hungry; someone will always want sex and be willing to part with resources to get it (just don’t take checks from Lenny Dykstra).