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Post image for Cash is not an investment

If you have an expectation of growth in your investment, forget cash! I am referring to cash investments such as money market accounts, interest bearing checking accounts, savings and certificates of deposits. It is merely a parking space for short term savings! Investing is expending money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property or by using it to develop a commercial venture. Where is your cash?

Savings accounts

I am not suggesting to stop saving! Saving was my strategy to success. Savings is the portion of disposable income not spent on consumption of consumer goods, but accumulated or invested directly in capital equipment or in paying off a home mortgage or indirectly through purchase of securities. More simply, money put aside for the purpose of future use. Most financial bloggers are always suggesting emergency savings for those unplanned or unexpected expenses.

Emergency savings usually is six (6) to eighteen (18 months of expenses. If I use fifty (50) thousand dollars as average earnings, your emergency funds should range anywhere from twenty (20) thousand dollars to sixty (60) thousand dollars in emergency savings. That is a lot of money to keep accessible for an emergency. Do you really need all of it to be accessible? The key word is accessible! How much do you really need accessible and how much could be working for you in the stock market or elsewhere?

How much money do you really need for emergencies?  The rest could be laddered in CD’s and eventually in longer term investments. My savings (cash/interest checking account) is just a few hundred dollars. More specifically, the portion of my earnings not set aside for my monthly expenses. My emergency funds are minimized because of a great deal of planning and access to laddered assets. I can use my credit cards for sudden expenses which will give me thirty (30) or more days to solve the problem.

Rethink your savings! 

Most rich people have their money working for them all the time. I want to have my money working too. I can use my (low interest rate) line of credit so I do not incur (14-188% interest) credit card. Last, I can sell stock to take care of the emergency. There are enough safety nets that I feel comfortable with this strategy. In addition, part of my budgeting process is planning for emergencies. Most emergencies are known if planned properly. If you drive an old car, you should expect unplanned repairs.

As you accumulate more and more assets, you need to do the planning to protect them. It may be insurance, savings or planning. In business, we call this risk management. Risk management is the forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact. I often apply business strategies to my personal finances because it makes sense! I do not want my business or my personal finances to go bankrupt!

What can you do?

Where should you put your savings? Your first step is to figure out how much you need accessible immediately or within thirty (30) to forty (40) days. It is sort of the planning you should do when you figure out how much life insurance you need. If I died suddenly, my wife would need sufficient money to pay the mortgage and other expenses until she received the insurance check. The same planning is necessary for your emergency savings number.

The rest of your savings will have different priorities or maturity dates. You may need two (2) or three (3) thousand dollars in a savings account, but access to much more over time for those unplanned emergencies. What are your circumstances? Do you have a lot of assets or access to cash if you need it? Is your job/career stable? Is your debt low or under control? If you lost your job tomorrow, do you have a plan or are you one paycheck away from bankruptcy? These answers determine what you do!

Similar to any savings you may need in five (5) year or less, you should be more conservative with the investments. For example, I would not invest fifty (50) thousand dollars in a volatile stock or fund because I want to be assured I will have those funds in five (5) years. I would hold these investments in a brokerage account where there are no penalties for withdrawal early. The exact choice of investment is based on your personal risk tolerance and need priority.

If you have several layers of safety, a secure job and a solid plan, you still want to assess the investment risks. I set up a brokerage account seventeen (17) years ago and never needed to liquidate the investment. In the meantime, it has more than quadrupled in value. The stock market is not the only choice, but certainly the most liquid. You can sell your stock and have cash within just a few days. Homes, businesses, collectibles, etc are not as liquid.

Final thoughts

I tried to offer a different perspective on a long standing personal finance rule. I hope I am stimulating thinking and discussion. I have spent a lifetime trying to reach my financial goals. I managed to achieve it early (38 years old) and now I want to share my strategies and insight to help others achieve it too. Rich successful people keep their money working and growing. What are you doing with your savings? Do you consider cash an investment?

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Post image for The Best Financial Adviser is You

Do you really need a financial adviser? What do you expect a financial adviser to do for you anyway? You can get a fee only adviser to prepare a financial plan and still fail! A financial plan is just a set of financial goals based on your information! It is just a matter of setting goals and monitoring your progress. Some may call it child’s play.  How is it working for you? Read More…


Post image for Don’t Envy the Rich!

The rich are different from you and me. (F. Scott Fitzgerald) Yes, they have more money. (Ernest Hemingway)  “They possess and enjoy early, and it does something to them, it makes them soft where we are hard and cynical where we are trustful in a way that unless you were born rich, it is very difficult to understand.” (F. Scott Fitzgerald) Yes, the rich are different from you and me, they have more problems! Read More…


Post image for How to Cope with Change

Change is inevitable! Recently, my wife and I went to New York for my sister in law’s birthday party. Since we live in Los Angeles, we had to get airline tickets, make arrangements for the dog and find a way to the airport. No big deal, we cashed in miles, our children watched the dog and we drove to the airport. If it were only that easy! You have to deal with all the possibilities and some you never thought of! Read More…


Post image for Easy Ways to Cut Commuting Costs

How much of your monthly pay do you spend on getting to and from work? When you factor in the cost of fuel and wear and tear on your car, you could be shelling out a pretty penny. The longer your commute is, the more you could also expect to pay for car insurance and maintenance. Yet for many of us, simply walking to work is just not an option. Read More…


Post image for CAMP Is the New Acronym for Retirement Readiness!

CAMP is not a place with temporary accommodations of huts, tents, or other structures, typically used by soldiers, refugees, prisoners or travelers. When I was a child, I went to camp to escape the New York summers. CAMP is not a destination! If you do not know what CAMP is, you should! CAMP is a way of realistically measuring your retirement readiness.  Read More…


Post image for How Do You Measure Your Progress?

I measure my progress daily, weekly, monthly and annually. I  set goals and monitor them periodically. I learned these skills very early and applied them in everything I want to accomplish. If you want to achieve  financial or other goals, you need to monitor your progress. How you measure your progress is important for success ! Here is the secret to my success! Read More…


Post image for Is It Too Late to Buy a Home?

Are you too late to buy a home at a bargain price? Home values are going up all over the country and you may be too late! If you are looking for the perfect time to buy a home, you probably missed it. Similar to the stock market, timing the market is difficult if not impossible. Real estate is cyclical and it goes up and down! The best time to buy a home is when you can afford it.  Read More…


Post image for 7 of the Best Paying Jobs You Can Receive With An Online Education

Reaching your financial goals is tough if you don’t have a strong, steady income stream. And that’s even harder to achieve if you don’t have the proper degree to help you land a decent job. But how can you go to school when you’re busy working? Luckily online schooling has opened the doors to expand your career opportunities, and a lot of these programs can lead to high-paying jobs. Check out these high-paying fields you can get into with an online education. Read More…

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Post image for 5 Frugal Reasons to Ride a Bike

Why I ride a bike? It is fun and it makes me happy! Do you remember how much fun riding a bike was when you were a kid? Guess what, it is still is! Riding a bike is exercise and good for the environment, but it is much more.  Why should you bicycle and what is so great about a bike? If you have to ask, you don’t know! If it has been a while since you rode your bike, here are some reasons to start.
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