June 07, 2009

Back in Russia we saw little difference in the expenses and spending the  cash in personal finance.  Life was simple you buy something and you have expense – same thing.   It was very interesting for me to learn in my life in the states this is not the same thing.   It is very easy here to get an expense such as buying the car spending very little cash but  having liabilities instead.   If you count  car as an asset you would see after your initial purchase only interest payments and depreciation are “expenses” while you may have a lot of cash flowing out paying principle.

With Credit cards another interesting thing happens – because you get about 1 month of interest free credit (if you pay your ballance in full) you have about 1 month lag between expenses and cash flow.   If you spend a lot on a credit card one month it will affect your cash flow on the next month.

With income things may not be as straight as well.   There is something called “Flexible Benefits” which can be used for child care or medical expenses which  is seen as an income but does not directly become available cash in your bank account – you have to incurr expenses and apply for reimbursement to get true cash out of that.

These things get personal expenses much more complicated (though on the positive side they teach you bunch of concept you would need for business finance anyway).   Because of these things I have been left more than once I felt somethat confused about financials – the change in the bank account for the month may not really match the expenses you had during it.

Notify of
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x