15th Century Technology that Can Improve Your Financial Future
How can 15th Century technology save me $100s?
The system of debits and credits in journals and ledgers that is still the basis of today’s accounting systems was first described by Luca Pacioli in 1494. It is also the principle behind the ‘checkbook register’. With more and more people using payment methods other than paper checks, the checkbook register is better called a transaction register today.
How can just paper and pencil save me money?
By recording (writing down) your transactions as you do them (or soon after) and calculating your remaining balance, you can avoid fees from both the credit union and merchants. It also gives you a history of your spending. This history allows you to realistically plan for the future. It is as simple as that.
Why should I depend on a 500-year-old system and not the latest computer systems?
As efficient and powerful as our computer systems are, they cannot read your mind or the mind of anyone else with access to your account and they cannot predict the future. The credit union’s systems do not know if you wrote a check until it tries to clear, if you signed up to have your car insurance debited from your account or whether your employer has changed your payday or pay amount. Despite attempts by many companies and organizations, no system has the knowledge about your finances that you do. Therefore, it is up to you to keep track of your finances.
What about the items that come out every month? The date they post changes.
You should record automatic and recurring transactions, such as insurance and loan payments, at the same time you record the deposit needed to cover them. If you do this, the actual date the transaction posts to your account does not matter. Looking at your past transactions in your register, is a great way to remind you what upcoming payments you have.
Does my transaction register have to be paper?
No, you can use any method of tracking your transactions and your remaining balance that works for you. It doesn’t have to be the traditional register you get at the credit union. It can be an Excel workbook on your computer, a text document on your cell phone or one of the numerous software programs available. The action, not the method, is what is important.
What, again, do I have to do to save $100s?
There are three important things you can do that can save you $100s.
1. Record your transactions at the time you do them or soon after.
2. Record recurring transactions at the same time as you record the deposit needed to cover them.
3. Calculate the remaining balance after each transaction.
4. Don’t spend more than the remaining balance.
IMPORTANT: If you don’t do #4 (Don’t spend more than the remaining balance), you’re probably not going to save anything but at least you’ll know why.
Is there anything else?
Yes, keeping track of your account is just the beginning. You need to check your records against those of the credit union (reconcile) and you need to plan for the future (budget). These, however, are topics for future posts.
Jim Yates, President
First Education Federal Credit Union