Sometimes I amuse myself. Selection of this article title is an example of how I do that. I could have used something less provocative that didn’t immediately bring up negative connotations and raise the hair on your neck. Because, for sure, hiding money is a technique that can be and frequently is used to commit fraud. But in this case, it’s about the opposite.
I discovered early on in my life that I had a superpower. I developed an amazing number of techniques to hide money: first, for myself and then for my employers. All for good cause. And now I’m going to share the secrets of my superpower with you.
This superpower has become so ingrained in who I am and how I operate, that I forgot it was in fact a talent. Until I recently read an article by Lee Rosen of The Rosen Institute, (www.roseninstitute.com), “How Hiding Money Pays Off.” And the light bulb went off. You may not know about it. But you should. Lawyers who are solos, at small or midsize firms, or even lawyers involved in management at large firms need to know about this.
I got started hiding money from myself while still in my late teens. I was living on my own, working a full-time job and two part-time jobs while supporting myself through college, graduate school, and then computer school. I lived on a tight budget, to say the least. There were times when I would desperately need an infusion of extra money; car insurance came due, or the car needed repair. A flat tire that could not be repaired was a budget killer. When my 11-year-old car needed new bushings and suspension coils, I was almost suicidal!
A reality of life, especially for those of modest means, is that if you have money available you will spend it. Every penny of it. It can be the difference between a dinner of spaghetti, or spaghetti with tasty meatballs! There is always something needed to use that tiny bit of excess. Save it? Not a chance. Yet, I knew inevitably that I would need to come up with a lump sum for something essential. What to do?
I started by squirreling away $5 bills. One at a time, whenever I got one in change, I would tuck it in the little flap behind my checks, in my checkbook holder. It was easy to forget they were there. When the accumulation made a lump I could see, I would swap them for a $50 bill. I put it into a hanger in my closet that had a hidden fabric pocket. It was forgotten again. When I had another accumulation there, I would deposit the money in my checking account, and immediately write a check to myself in the amount of the deposit.
For security, I would endorse the check “deposit only” with my account number. Then carefully fold it up and hide it in the back of my nightstand drawer. When the ultimate need arose — the insurance bill, car repair, unexpected medical expense — I would void the check, making the money immediately available to write a check.
Oh, you’re thinking, this couldn’t work to fool you. Every time you do your bank reconciliation, you’re going to be reminded the money is there. No, you’re not. It just is an outstanding check and you learn to ignore it because you’re in on the game, and you’re the benefactor. I assure you this simple method works incredibly well.
Nowadays, I no longer live hand-to-mouth. But I am a single woman in my own home with lots of bills to pay. And there are always repairs, upgrades and projects that require big sums of cash such as when I decided I needed a whole house generator, because the electrical outages in my area were increasing, and I needed my sump pumps to keep working. (That was a three-year saving project.)
I still set money aside regularly. My bookkeeping is done through QuickBooks, so aside from moving money to my savings account, when possible, I still regularly write checks to myself and stick them in a drawer, especially if I get a lump sum, such as a tax refund check. Because if I put it into my savings account, I can see it there. I hear it calling my name. I know I’m overdue for vacation, a good meal out and so forth.
The full-time job I worked after high school was as a bookkeeper. It was a multicorporate environment consisting of a mail order company, a wholesale pet supply company and a retail store. The retail store had a big payroll and lots of overhead. And two greedy adult sons of the owner who would too often withdraw cash for personal use, creating impossible cash-flow (and accounting) situations. So, I started putting my skills at hiding money to work. And that’s when they truly developed.
Journals were manual entry back then. But it was easy to squirrel money away by taking advantage of any surplus before it was distributed as profit. I would simply write a check payable to Pennsylvania Department of Revenue, as a sales tax deposit, or to IRS as a payroll withholding tax deposit. But manually I had a ledger account called “Hold for Future Use” hidden with other expense accounts, and that’s where the balancing entry went. The son in charge of signing checks never questioned or objected to using money (which he often wanted to “take” as distribution) to pay mandatory taxes.
Fortunately for him, I was scrupulously honest. Because if you’re thinking I could just as easily have pocketed that money with a few additional minor finagles, you’re right! But when we hit a three-payroll month and he would be in panic, I always managed to “find” the cash by voiding the previous checks and balancing entries. Suddenly the money was in checking, available for payroll and used for that purpose before it could be misused for anything else.
Decades later I discovered that law firms were in need of such skills. Most firms experience cash-flow issues during certain cyclical periods. Plus, firms tend to spend every penny of available cash at year-end in the form of bonuses and owner distributions. Consequentially, the first quarter of the following year can be a roller coaster.
However, in properly managed firms, I needed a co-conspirator to ensure the money was safely hidden and didn’t arouse suspicion of other owners, who might randomly ask to see reports and records. My co-conspirator was the managing partner. Whether I was setting dollars aside for the upcoming three-payroll month, the renewal of liability insurance or to ensure delighting owners at the end of the quarter with an unexpected distribution, together we ensured a smooth operation. We kept the pressure on owners to bill and collect to protect cash flow; never showing an excess until right before it was used for good cause. We kept unreasonable compensation demands away. We had the capital to support goals when needs arose. It was all good.
As Lee Rosen says in his article, “Will it work for everyone? Probably not. If you’re in a drug-fueled rage, digging for change between the sofa cushions, then I’m guessing you’re going to unwind this trick and give the money to your dealer. But if you’re the average person without an expensive addiction, then you may well find yourself happily ‘surprised’ when the money you need is already there.” The same applies to a managing partner (e.g. co-conspirator) who is living beyond his/her means and wants to increase distributions beyond prudence. Because the superpower of hiding money is just a trick to ensure you have cash when you need it.
A version of this article originally appeared in the June 24, 2024 issue of the Pennsylvania Bar News.
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