A recent report put a dollar amount on the costs for American households that use cash instead of electronic forms of cash. Turns out it's expensive to rely on cash and not plan ahead instead of using debit or credit cards. Sure, this report on American payments habits paints some broad strokes, but the bottom line is that it costs almost $1,800 a year per household to use cash, which translates to $200 billion for the entire country. After reading about this, I immediately thought about how personal bookkeeping could help a percentage of these households and hopefully save them some of that $1,800 that is being wasted.
Spending many years in the ski bum industry, I was surprised by the number of people that think checking accounts are a waste of money because of bank fees. If you have a job with payroll that has the direct deposit options, most checking accounts are free. If you don't have direct deposit, then you may be able to get a free checking and savings account if you set up a monthly reccurring transfer. Either way, the fees can be avoided. The other option is to go to a check cashing business. To me, these businesses remind me of a combination of a pawn shop and OTB. Not only do they charge an arm and a leg, but you also have to take time out of your day to go there, you have to account for the gas costs, and the floors are sticky. Depending how you value your time, these 3 things can add up to $100-$150 bucks per transaction, and that's being conservative.
Get a credit card and build some credit. If you only use cash, then your credit score will reflect that. Once the bank account is set up, get a credit card and use it sparingly. Using a credit card will help build your credit score and lead to better things down the road such as a mortgage.
The bottom line is simple; open a checking and savings account and go from there. Once those are set up, it won't be hard to start saving and planning. Next thing you know, you could end up with a nice house, car, travel plans, etc. I used to think I would start a company in Alta, UT and name it Wasatch Ski Bum Financial to help these ski bums save some cash, start a IRA, etc.. After giving it some thought, I realized it wouldn't be all that profitable, I would be dealing with people that would blow off appointments for months on end or until a dry spell hit, and want to do work based on trade for gear.
I Covered The Basics, Now What?
Once the simple stuff is set up, its time to figure out where your money is going. Either you have to track your expenses, or 'itemize.' This isn't terribly complicated, but yet it terrifies people. Using your online access to banking and credit card institutions makes this very easy. However, if you are still using cash, this process becomes a royal pain in the butt.
The easiest way to get this going is to buy QuickBooks Pro (their cheapest product) and start plugging in your transactional detail. There are many other options, but this software makes your life simple. It's cheap and can be automated to a certain extent. Now its time to connect your accounts to this software and reconcile them on a monthly or quarterly basis.
Now you can see where your hard earned money goes. No matter rich or poor, 33% of American's money goes to housing. The other major expenditures are food at 13%, transportation at 17%, and the list goes on from there all the way down to 5% on
entertainment. You would be surprised to see where your money falls. Maybe your wife has a pricey Starbucks habit, or maybe your husband likes to spend his money on endless car accessories, or maybe your kids are spoiled and you could save some money there. Or it could be the exact opposite, you might find you can spoil your kids more, or your husband can get that oversized rear spoiler he always wanted and it won't break the bank.
The pros definitely out weigh the cons on this one. Personal bookkeeping might sound scary and could be one of most boring things you can think of, but it's worth it no matter what way you try and reason it.