Thursday, January 14, 2010

Living on a Cash Basis was a Good Experience

When I was in college, students weren't eligible to get major credit cards on their own. We typically lived on a cash basis, paying cash or checks for our purchases. Looking back, living on a cash basis quickly taught me financial responsibility, since the lack of cash had consequences. Here's what I learned:
  • Know my account balances. I quickly learned if I didn't have cash, I couldn't buy anything. Therefore, I balanced my checkbook and tracked my spending. Otherwise, I wouldn't have funds when I needed them.

  • Save for future purchases. The only way I could make a large purchase was to have the entire amount when buying it. Therefore, I saved to buy what I wanted.

  • Earn more when needed. If I didn't have enough funds to cover required expenses, I earned more, since nobody was lending me the money. Therefore, I found jobs that enabled me to earn more.
  • For our daughter, I think cash basis money management will help her develop skills and create a good financial foundation. No need to have credit and debit cards before having a basic understanding of finances. I believe once good financial capabilities are developed, a transition to using credit responsibly can be done.

    For more on Crossing Generations, check back every Thursday for a new segment.

    This is not financial or parenting advice. Please consult a professional advisor.

    Copyright © 2010 Achievement Catalyst, LLC


    Wojciech Kulicki said...

    Awesome lesson to learn at such a young age. It's a shame today's generations don't have the luxury of being forced into the same approach...

    Christina said...

    I wish I could the process and make it a habit. This approach is something I'd like to teach my kid. Thanks for sharing.

    Debt settlement Attorney said...

    Yes, the attention should be paid on the three basic things to stay out of the financial mess-1) know what is left in your account after the end of every month 2) If you do not save anything, then make a habit of saving whatsoever little you can 3) keep in mind that always pay for the things in cash , so that you are indicated that you are not going out of budget .