You know how some of the jokes in Reader’s Digest aren’t very funny, but are still very true? Here’s one that has some humor to it, but, more important, I think it offers some very good financial advice. This advice is certainly well-suited to my Indiana bankruptcy clients as they complete the bankruptcy filing process and begin to rebuild their financial lives. In some cases following this very good advice could help clients stave off foreclosure on a home or even help them avoid bankruptcy. Actually, this is advice all of us should follow.
Here’s the joke: A rich, miserly old man on his deathbed informs his wife he wants to take all his money with him. He instructs her to put all his money in the casket with him when the time comes. At the funeral, the widow’s best friend sees the widow put a metal box in the casket. “Surely you didn’t put the money in there!” exclaims the friend. “I did promise him I would”, said the widow. “So I got the money together, deposited every penny in my account, and wrote him a check. If he can cash it, he can spend it!” (See what I mean about the story not being very funny but, at the same time, having a lot of truth to it?)
In working as the attorney for tens of thousands of bankruptcy clients around the state of Indiana over a period of two and a half decades, one thing I’ve noticed is that many of them hadn’t been using a checking account at all, but were instead paying for expenses and purchases with credit cards, debit cards, or cash. Nothing wrong with that, but I can’t help thinking that, no matter how you pay for things, it would be a good idea to keep a “check register” for each credit or debt card, and even for the cash you allow yourself to spend each month. Having two or three small notepads (one for each account) small enough to fit into a man’s pocket or a lady’s purse would do the trick. The big thing about noting down each expenditure is that it reminds you how much you’re spending. That way, you’re less likely to go over your limit.. Say you have a Mastercard with a credit limit of $3000. Every time you use that card, subtract that amount from your “balance”. When the MC statement comes and you’re paying it (hopefully all of it, but at least some) with a check or money order or bringing cash to the bank, cross off all the charges you’ve covered in your little MC notepad. That way, you always know where you are with your spending.
Remember, the Indiana bankruptcy system is a safety net to help people who’ve been overwhelmed by events beyond their control (job loss, prolonged or disabling illness, divorce, natural disasters) get back on their feet. Once that’s achieved, just like with all of us, people have to learn to practice responsible financial management. So the rule in Reader’s Digest is really a good one: If you can cash it (meaning you have enough money to pay for it, even though you you don’t have it on you in cash), you can spend it. Otherwise, maybe hold off on that purchase until you’ve saved up for it….. Truly, I’m not joking.