The Two Methods Of Cash Flow

Method 1: Using a line of credit.

Some people choose to use credit as a means to cash flow expenses. While there are some advantages to using credit, the disadvantages far outweigh any benefits. Why do people use credit in the first place? Here are some reasons:

• Credit requires no patience. Access to instant money can be tempting. People naturally don’t want to wait for something they want. This results in student loans, credit cards, auto payments, and mortgages. While some argue that these things aren’t necessarily bad, everyone agrees that you’ll most likely pay interest when choosing the credit route. I don’t like paying money to spend money, so I shy away from the use of credit.
• Credit sometimes promises rewards. Banks will sometimes entice customers with cash back rewards and other bonuses for the use of their credit cards. But remember, you can lose a lot of money saving money. Anytime you get cash back you should consider it gravy, not a reason to spend.
• Credit is widely (and wrongly) believed to be secure. The use of credit cards is no more secure than using your debit card. Both debit and credit cards can be processed using a global payments company such as Visa or Mastercard. When you’re shopping online, use of either credit cards or debit cards is less secure than using a service such as eBillme. The eBillme payment option uses top-of-the-line processing methods using your bank’s online bill pay and helps protect against online fraud. Banks have securely processed payments through this system for years, and so should you!

Method 2: Paying cash.

When you pay cash, you’re paying with money you actually have. There’s a debt free revolution budding out of the last recession, and this method is becoming more and more popular. People pay with cash for the following reasons:

• Cash requires no interest payments. When you pay for something in full, you don’t have to pay extra money. This can save the typical family thousands upon thousands of dollars over a lifetime.
• Cash ends the transaction. Some people like to pay in full and get it over with! Paying with cash allows you to end the transaction and eliminates the stress of having to find a way to pay for your purchase later.
• Cash encourages healthier savings. When I made the switch from paying with credit to paying with cash, I found that the amount of money I held in my checking and savings accounts was higher. Why? When you plan on paying with cash, you need more money in your bank account to pay for goods and services. This helps when you have emergencies and need some extra money to pay for things.

When To Pay In Full

There are some transactions where it is near impossible or impractical to pay in full. For example, many people can’t conceive of paying for a four-year college degree up front. Understandable! The trick for these larger transactions is to keep a predetermined amount of money set aside. Allow me to explain. Let’s say it costs $5,000 per year (surely an affordable college education) to go to school. Based on that amount, it would be reasonable to save up $2,000 to $3,000 in a separate account to cash flow tuition payments, book purchases, and other college related expenses throughout the year. At the end of the month, let’s say your special account balance goes down by $1,100. Simply put this money back as quickly as possible to get back up to your predetermined savings amount. This is very similar to having a line of credit, but you don’t have to pay interest!

Don’t Forget To Prioritize

When you’re creating your cash flow accounts, don’t forget to prioritize. Here’s a bird’s eye view of our financial priorities:

1. Household mandatory expenses (always feed your family first)
2. Charitable giving (giving is crucial to the success of our financial plan, it takes the focus off ourselves and allows us to help others)
3. Emergency funding
4. Financial improvement funding (major goals such as college, paying off the house, investing, or anything that helps build wealth)
5. Enjoyment funding

You might have a slightly different view on how priorities should be set, and that’s okay. The point is to think it through and implement your plan! So, how do you cash flow expenses? Your thoughts?

When you walk up to the counter in a store you have a variety of payment choices, be it the traditional credit cards, store branded credit cards, cash, debit, etc… and as the data is telling us, people are most comfortable with cash. Offering a variety of methods means giving customers comfort when it comes to the thing that matters most, their money.

Yesterday we saw an example of that with Apple and the iPad, the scenario was fairly straight forward, customer takes $600 to a store to buy an iPad, she is rejected, and the news is all over it.

When it comes to online shopping the payment mix is quite different. The majority of payments are credit or credit alternatives. Customers are clearly not shopping with their prefered payment methods.

Are some customers not buying online because you only offer credit?

The Answer is yes, and the amount was estimated by Javelin Research to be a staggering 21.1 Billion in 2008 alone!

Will giving people choice at the checkout get you a new customer?

The answer is yes. If you offer a secure cash payment option such as eBillme and allow consumers to pay with money they have without disclosing personal financial information, be it using online banking or walk-in (Similar to the iPad scenario) you are going to gain sales, and new loyal customers.

Do you agree that offering a secure cash payment method at the checkout will help you increase sales?

Sucharita Mulpuru, Principal Analyst, at Forrester Research, will host an in-depth webinar on the impact of the credit card bill, and the implications to online shopping and online retailers. Find out what online merchants need to implement at the checkout, to be ready for the new legislation and consumer behavior.

Agenda:

• What is in the Bill
• What is not in the Bill
• Impact on eCommerce
• Who is impacted
  What you need to know, and do

Date: Wednesday June 24th
Time: 1:00pm EST

Register Today: https://www2.gotomeeting.com/register/812913571

Find out more about eBillme, and non credit payment options.

When you go to a store near you, you walk up to the teller, hand off the new blender you like, get it scanned and pay. When you pay, you the customer make a choice, you can pay with credit instruments, or you can pay with cash or cash alternatives. The credit card bill will absolutely have some impact on how people will pay in general, but unlike brick and mortar location, online merchants have by in large depended on credit instruments to process payments. This has several implications especially to those retailers serving the under 21 market.

The credit card bill has reduced the ability of those younger than 21 to borrow, with some exceptions

1. You may still get credit if your parents sign off
2. You will need to take a course before you qualify for credit
3. Show proof that you have stable income and the ability to repay what you borrow.
4. OR, You can get Married

If you are younger than 21 and are not ready to walk down the isle just for the privelige of shopping (especially shopping online), you can turn to cash payment alternatives such as “eBillme Teen” to buy online with cash.