Thursday, January 7, 2010

Your Paycheck

I remember the day my sister brought home her first paycheck. It was not a check. It was cold hard cash in a tan bank envelope. On the outside listed her gross pay and all of the deductions taken. She proudly poured the contents of the envelope out on the table. I was stunned at how much was there, but then again I was about 8 at the time. Sis proceeded to take a few dollars out for her wallet and the rest went in her little Lane Hope Chest that she kept on her shelf. It was nestled there with the cash she earned from babysitting. My sister has always been a wonderful saver. She learned early to pay herself first.

I fast forward to an evening before Thanksgiving 2009. My son arrives home with a debit card. It holds his paycheck. Somewhere in his email is the pay stub listing the gross pay and deductions. There was no ability to place a few dollars in his wallet and put the rest in savings. There is not box on his shelf carefully crafted in Scouts that holds cash from lawn mowing. All of his earned money has been given to him in the form of plastic or checks. Money does not have the same impact on him as it does on me.

I have never liked paying for little things with a piece of plastic and it is way too much bother to write a check for a cup of coffee. I have cash in my wallet, not a lot, but I helps me keep track of the fact that I am spending it on little things. If it is the day before payday I am not spending my last $10 on lunch. I am shopping from my fridge and finding lunch there.

Cash has value if only to show you what you have. How long did it take you to earn the money to buy the Latte you had this morning...more time than it took you to drink it? We tend to only get sensitive to that when making big purchases, the 30% decrease in value when you drive your newly purchased car off the lot, for instance. You need to be alert to it in other areas as well. If it takes you two gallons of gas to commute to and from a minimum wage job, that just spent the first half hour of labor on the job.

Twelve or sixty easy payments does not decrease the cost of the item. You already know that it increases it with interest payments. Another $50 a month out of pocket may not seem like much until you have a number of those easy payments. Consider saving for the purchase. There may be several ways that it becomes less cash out of your pocket. As an older model the item may be marked down and there are no interest payments on it when you wait to buy it with cash. Then again, you may decide not to buy the item at all.

Use your paycheck as a ruler to measure not just your needs but your wants.

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