by Jimmy Flatbush

Created on: July 13, 2010

My grandparents accumulated a substantial nest egg by paying for every purchase in cash. Their cash-only mantra emanated from experiencing the worst economic depression in American history. Millions of people saw their savings vanish after banks across the country closed their doors to business. As impressionable youth, my grandparents learned the lessons given by essential money rule number one.

The cash-only rule is as essential now as it was during the 1930s. Twenty-five years of unprecedented prosperity came to a screeching halt in late 2007. What transpired was a series of events that eerily mimicked the advent of the Great Depression. Homes foreclosed at a record rate, banks failed because of bad loans and a rush on bank deposits, and unemployed soared into the double digit range for the first time since 1979. Bankruptcies forced millions of people to resort to cash-only purchases, thus changing once lavish lifestyles into ones predicated on purchasing necessities.

Paying cash for every purchase may not be reasonable for high price items, but then again, my grandparents saved enough money to pay for their cars and home without resorting to taking out loans with extortionist interest rates and bank fees. Their success in managing money leads me to believe that the list of essential money rules can be neatly filled out by following their financial prudence.

Monthly Budgets

Developing monthly budgets is an integral component of managing your money. However, just putting down some numbers does not guarantee fiscal responsibility; you must abide by the financial constraints. Use a spreadsheet or an old-fashioned legal pad to crunch your financial numbers. Start with recurring expenses such as car and home payments, and then work your way to infrequent purchases. Monthly budgets are more manageable when you enroll in a utility’s fixed payment program that bills you the same amount each month.

Emergency Fund

Another essential money rule that my grandparents taught me was saving a significant sum of money for unexpected events such as medical bills or property damage not covered by insurance. With a second dip expected to materialize during the current recession, employment experts recommend saving for at least six months of unemployment.

Wants versus Needs

Wants drove the spending spree that fueled the economic boom. They were purchases that were not necessary for maintaining a vibrant lifestyle. An electronic device’s short shelf life meant people

• 1
• 2
• Next Page >>