I’m reading Portfolios of the Poor: How the World's Poor Live on $2 a Day by Daryl Collins,  Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven.  The book stresses that the very poor face three hardships when it comes to money management: low income, irregular income, and lack of financial instruments that meet their needs. Yet, in the face of this, they still manage to create a number of systems that, while by no means ideal, help them to manage their money.
 
I certainly don’t face the sort of poverty and hardship that the book describes, and I support the idea of creating the sort of financial institutions and instruments that are needed. However, I deal with the situation of poor cash flow all the time.  

Now, I am not the most financially savvy person (though I know how to pinch a penny until it squeals), so what I say here may be re-inventing the wheel, and this isn’t meant to be a blue print for others, but we can
only learn from each other.  So, today, I thought of sharing how I learned to manage my money and my life better.
 
One of the most annoying events in my life, and this is a recuring situation, happens when I've saved enough in my checking account (which is my only current account) for property taxes when, wham, there is a medical emergency, and I find myself writing a great big check days before the taxes are due.  While I wait for the insurance check to arrive,  the interest on the house tax keeps going up, and I’m dashing to the tax office every payday with a check for a hundred dollars or so. I swear, this happens every year or so. 

The authors report numerous incidents of people putting away small amounts of cash to cover emergencies.  Like a flash of lightning, it came to me.  What would happen if I found a way to put a couple of thousand where I could get at quickly, the next time this situation arises? Like a three month CD? Or, if things keep going the way they are, in a biscuit tin under the old pear tree by the river bank? Not, obviously, in my house where it could be found by children for buying bubble gum.
 
Then, even as I was thinking this the other week, a friend needed cash, quick, to deposit in the bank to meet an automatic mortgage payment.  She expected to get her pay check directly deposited a week later, but that would be too late, and would trigger overdraft fees. I had to send in my car payment and was reluctant to make the loan for that reason. Then I recalled reading about people making short term loans for small amounts between neighbors in order to deal with this sort of emergency.  So here's what we decided to do. I would lend her cash in the amount of my car payment, which would meet her needs.  My neighbor, on the day before she expected her paycheck deposit, would write my car payment check and mail it directly to the company that held my loan.

I realize that I was taking a risk, I gave her the payment slip and envelope (she provided the stamp – I guess you could consider it interest), and there was nothing to stop her from deep-sixing it. And there was no paperwork – I’d never have been able to prove that I gave her the money. But we’d known each other for years, and the worst that would have happened was I’d have missed a payment and have been charged interest.

Sure, in some sense this wasn't too bright a money move, but I discovered something much richer:  a forging of a deeper bond with my neighbor and an unstated promise that she would be more than
willing to help me when I needed it.
 
Now, I like to think that the world will get better at meeting the financial needs of the poor elsewhere, but I have to agree with the authors of the Portfolios of the Poor, everyone needs basic money management tools because they will only help those with less to get out as much as they can of what they make or have.  I suspect that some people here in U.S. are already doing this.
 
Good luck,
Spuds